A formal assessment of new-developmentalist theory and policy*

Abstract

We develop a formal framework that endogeneizes the productive structure of a small open peripheral economy as the outcome of a problem of technical choices. We subsequently examine the main theoretical theses and policy prescriptions of the New-Developmentalist approach to economic growth. We argue that: a) not only does the pattern of specialization depend on technical conditions, but also on income distribution; b) in an economy without rents, the level of the money wage-nominal exchange rate ratio is univocally determined once the rate of profits is known, and shows an inverse relationship with it; c) if differential rents are considered, the level of the rate of profits can be set independently of the money wage-exchange rate ratio; d) the level of the exchange rate that ensures normal profitability of the primary sector need not coincide with the current-account equilibrium rate; e) the effective exchange rate need not gravitate around any of these two former levels, which must be rather seen as minimum thresholds of the effective rate; f) the unpleasant distributive consequences of exchange-rate depreciation can be partially avoided by means of export duties that do not raise primary-commodities production costs.

Evaluando el rol financiero del tipo de cambio

“…Based on these stylized facts, we built a theoretical model inspired on Frenkel and Ros (2006) and Dvoskin and Feldman (2018). Differently from them, we explicitly included two elements in our model, namely, difference in productive structure and financial cost of depreciation.…”

“…The contribution aims to rethink the role of the RER for growth and structural change in a context of high financial integration, by constructing a theoretical framework based on Dvoskin and Feldman (2018). Results from the model shows that exchange rate policies promote capital accumulation and structural change only under strict, specific conditions.…”

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Our contribution aims at rethinking the role of the exchange rate as a tool to boost investment and structural change, by constructing an analytical macro model based on Frenkel and Ros (2006), Ros (2015) and Dvoskin and Feldman (2018). We consider, in particular, the financial cost of depreciation, which is generated by imbalances in the foreign exchange rate position in firms' balance sheet.

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On the role of the exchange rate as a tool for industrial competitiveness

“…In previous contributions (Dvoskin and Feldman, 2018;Dvoskin et al, 2019), we have critically discussed some of the expansionary channels of devaluations addressed by this literature, known as New Structuralism or New Developmentalism, showing they lack the sufficient generality to become a truly robust explanation of the drivers of economic growth. Moreover, we have shown that this negative conclusion at a theoretical level is also supported by empirical evidence that corroborates that the alleged relation from RER to growth is not conclusive.…”

Exclusion in ‘Ricardian’ Trade Models

“…For a critical assessment toFrenkel and Ros's (2006) contribution, and more generally, to what is currently known as the 'New structural approach', seeDvoskin et al (2019); for a critical reconstruction of Bresser's contribution, seeDvoskin and Feldman (2018).…”