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Convergence and Balance of Payments Constrained Growth: Is There a Puzzle?

In: Models of Balance of Payments Constrained Growth

Author

Listed:
  • Carlos Garcimartín
  • José Antonio Alonso
  • Luis Rivas
Abstract
One of the main implications of the neoclassical approach to growth is the existence of convergence across economies — although not necessarily to the same steady states — as a consequence of decreasing returns to capital. But, according to the balance of payments constrained growth theory as developed by Thirlwall, international convergence cannot be taken for granted. Although convergence can indeed occur in Thirlwall’s framework, the conditions that backward countries must fulfil to converge toward the leaders have some puzzling implications. In particular, non-price competitiveness must be higher in the less advanced countries than in the leading countries. This chapter is aimed at solving this puzzle by developing a model that attempts to reconcile the balance of payments constraint hypothesis with the notion of convergence. This model is employed to analyse economic growth in a sample of eleven developed nations over recent decades.

Suggested Citation

  • Carlos Garcimartín & José Antonio Alonso & Luis Rivas, 2012. "Convergence and Balance of Payments Constrained Growth: Is There a Puzzle?," Palgrave Macmillan Books, in: Elias Soukiazis & Pedro A. Cerqueira (ed.), Models of Balance of Payments Constrained Growth, chapter 7, pages 189-216, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-02395-7_8
    DOI: 10.1057/9781137023957_8
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    Cited by:

    1. Araujo, Ricardo Azevedo, 2013. "Cumulative causation in a structural economic dynamic approach to economic growth and uneven development," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 130-140.
    2. Missio, Fabricio & Araujo, Ricardo Azevedo & Jayme, Frederico G., 2017. "Endogenous elasticities and the impact of the real exchange rate on structural economic dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 42(C), pages 67-75.
    3. Robert A. Blecker, 2022. "New advances and controversies in the framework of balance‐of‐payments‐constrained growth," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 429-467, April.

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