A North-South Economic Growth Model: The Role of Income Distribution

Abstract

The main objective of this article is to present in a balance of payment constrained growth (BPCG) model the role of income distribution and technological progress in the growth pattern of a developing economy. For this purpose, an index of the quality of exports and the existence of distributive conflict in the labor market are taken into consideration. The technological progress of the South depends on income distribution and the technological gap. Based on this framework, four types of growth patterns —such as those explained in Fajnzylberg (2000)— are possible: 1) dynamic and disarticulated, 2) integrated and stagnant, 3) disarticulated and stagnant, and 4) dynamic with social equity. Several equilibrium possibilities (including multiple equilibria) were discussed. Furthermore, the South catching up conditions were highlighted.