The Remarkable Durability of Thirlwall’s Law

PSL Quarterly Review, Forthcoming

35 Pages Posted: 2 May 2012 Last revised: 4 May 2012

Multiple version iconThere are 2 versions of this paper

Date Written: December 15, 2011

Abstract

This paper contemplates the robustness of Thirlwall’s Law, a parsimonious expression that relates long run equilibrium growth in any one region to the product of world income growth and the ratio of the income elasticities of demand for exports and imports. Various extensions of the balance-of-payments-constrained growth model from which Thirlwall’s Law is derived are contemplated. In each case, Thirlwall’s Law is shown to reassert itself as a good approximation of the equilibrium growth rate. It is hypothesized that this robustness helps explain the widespread empirical success of Thirlwall’s Law.

Keywords: Thirlwall’s law, balance-of-payments-constrained growth, export-led growth, demand-led growth, natural rate of growth

JEL Classification: O41, E12

Suggested Citation

Setterfield, Mark, The Remarkable Durability of Thirlwall’s Law (December 15, 2011). PSL Quarterly Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2049748

Mark Setterfield (Contact Author)

New School for Social Research ( email )

6 East 16th Street
New York, NY 10003
United States

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