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The Economics of Demand-Led Growth

Challenging the Supply-side Vision of the Long Run

Edited by Mark Setterfield

The Economics of Demand-Led Growth is a collection of specially written essays that develop and apply the theory of demand-led growth. Long-run growth is usually portrayed as a supply-determined process. The contributions to this volume, however, are rooted in the theory of demand-led growth. In addition to general discussions of the role of demand in the long-run, the volume contains essays in the Kaldorian and Kaleckian traditions, and a section on the relationship between demand-led growth and structural change. The conclusion reached is that current neglect of the role of demand in analyses of long-run growth is unwarranted.
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Chapter 15: Is a Biased Technological Change Fuelling Dualism?

Challenging the Supply-side Vision of the Long Run

Pascal Petit and Luc Soete


1 Pascal Petit and Luc Soete A PERIOD OF ÔTRANSITIONÕ WITH LASTING EFFECTS? Over the past two decades, major structural changes have affected the growth process in developed economies. A cluster of radically new information and communication technologies (ICTs) has emerged, accompanied by the internationalization of markets, financial capital and production processes, and the transformation of work in general and the structure of the labour force in particular. Such changes have both transitory and longer-lasting effects, and only through experience and learning will economic agents ultimately adjust their behaviours to the demands of the new environment. Learning processes exist at various levels: within the technology-adopting firm, where efficient use of new technologies is heavily dependent on other users (subcontractors, customers or other firms and partners); among technology producers, who must adjust equipment to meet different user needs and confront different national technical standards; and among consumers, where cultural barriers slow the diffusion of new ÔpracticesÕ in some cases, and erect barriers to access in others. This nexus of only loosely related learning processes lends credence to the assumption made by Freeman and Soete (1987) and David (1991) that transitions from one technological system to another may be long drawn out.2 But we should also be aware that all transitional periods have historically specific features that can condition final outcomes (Amendola and Gaffard, 1988). Schumpeterian evolutionary theory (Nelson and Winter, 1982, Dosi et al., 1988; Arthur, 1989) stresses that adjustment paths may be irreversible, and that the evolutionary nature of long-run...

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