A Kaldorian approach to catch up and structural change in economies with high degree of heterogeneity

Abstract

This paper, based on Kaldor’s main contributions, discusses the specificities in the catch up process of developing economies with high degree of structural heterogeneity. The theoretical model developed shows that developing economies, when modernizing the domestic versus external stock of capital, can reduce the technological gap and thus obtain a faster growth rate without producing disequilibrium in the balance of payments in the long run. As income distribution explains the incentive to the introduction of innovations through capital accumulation, the model is well succeed in connecting capital accumulation, income distribution, technological gap and long term external constraint. We conclude that capital accumulation, under certain circumstances, can overcome external constraint if the accumulation effort promotes structural change increasing the importance of sectors more technological-intensive.

Keywords

• structural change
• technological progress
• industrialization
• external restriction