Handbook of Alternative Theories of Economic Growth
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Handbook of Alternative Theories of Economic Growth

Edited by Mark Setterfield

Comprising specially commissioned essays, the Handbook provides a comprehensive overview of alternative theories of economic growth. It surveys major sub-fields (including classical, Kaleckian, evolutionary, and Kaldorian growth theories) and highlights cutting-edge issues such as the relationship between finance and growth, the interplay of trend and cycle, and the role of aggregate demand in the long run.
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Chapter 1: The Structuralist Growth Model

Bill Gibson


Bill Gibson1 1 Introduction The structuralist growth model (SGM) has its roots in the General Theory of Keynes (1936), Kalecki (1971) and efforts by Robinson (1956), Harrod (1937), Domar (1946), Pasinetti (1962) and others to extend the Keynesian principle of effective demand to the long run. The central concept of growth models in this tradition is the dual role played by investment, both as a component of aggregate demand and as a flow that augments the stock of capital. The basic structuralist model has been extended to cover a wide variety of topics, including foreign exchange constraints, human capital (Dutt, 2008; Gibson, 2005), the informal sector and macroeconomic policy analysis (Lima and Setterfield, 2008). The model has served as a foundation for large-scale computable general equilibrium models (Taylor, 1990; Gibson and van Seventer, 2000). This chapter reviews the logic of the basic SGM and some of its variants and compares and contrasts the SGM with the standard growth models of Solow (1956) and developments thereafter (Barro and Sala-i-Martin, 2004). Both the structuralist and standard growth models are solved within a common mathematical framework and it is seen that each relies on an exogenously given rate of growth of a key variable. In the case of the standard model it is the labor force, and for the structuralists it is the growth of effective demand. In both cases these variables are taken as given for good reason: they are notoriously difficult to model accurately. It is seen that when structuralists attempt...

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