Patterns of Growth in Structuralist Models: The Role of Political Economy

Abstract

This paper presents a set of growth and distribution models in developing countries which reflect distinct political economy regimes. These regimes give rise to different institutional frameworks that affect macroeconomic outcomes. We focus on three cases: (1) a pure developmentalist state, (2) conflicting claims between workers and the government, and (3) financialization under a neoliberal coalition. The equilibrium growth rate is defined, following the Keynesian tradition in open economy growth model, by the Balance-of-Payments constraint (Thirlwall, 1979). The paper relies on cumulative causation à la Kaldor in periods in which the depreciation of the real exchange rate raises temporarily the BOP-constrained equilibrium rate of growth. The transition between one equilibrium level of the RER to another allows (under certain conditions) for a process of learning that transforms the income elasticity of exports and hence the BOP-constrained rate of growth in the long run. The model produces a variety of outcomes that help explain the contradictory results reported in the empirical literature associated with different constellations of power and institutions