Structural change and economic growth: Advances and limitations of Kaldorian growth models

Guilherme Riccioppo Magacho


Why some developing countries were able to reduce the income gap to developed economies and others were not? Although many different approaches have addressed this issue, few of them take into account one of the most evident characteristics of this phenomenon: the process of structural change. This paper reviews the theoretical basis of the Kaldorian approach for the relationship between structural change and countries’ long-term economic growth, emphasising its recent developments and its limitations.

According to Kaldor, structural change towards specific sectors increases continuously countries’ growth rates through a cumulative causation process. Although the author stressed it exhaustively, only recently Kaldorian models have incorporated this feature explicitly. Nevertheless, these models still face significant limitations to show how a cumulative causation process takes place in an open economy.


Structural Change, Multisectoral Growth Models, Kaldorian Growth Models, Export-led Growth

Full Text:



Angeriz, A., J.S.L. McCombie and M. Roberts (2008), New Estimates of Returns to Scale and Spatial Spillovers of EU Regional Manufacturing, 1986–2002, International Regional Science Review, 31(1):62-87.

Angeriz, A., J.S.L. McCombie and M. Roberts (2009), Increasing Returns and the Growth of Industries in the EU Regions: Paradoxes and Conundrums, Spatial Economic Analysis, 4(2):127-148.

Araujo, R.A. (2013), Cumulative causation in a structural economic dynamic approach to economic growth and uneven development, Structural Change and Economic Dynamics, 24:130-140.

Araujo, R.A. and G.T. Lima (2007), A structural economic dynamics approach to balance-of-payments constrained growth, Cambridge Journal of Economics, 31(5):755-774.

Arena, R. and Porta, P. (2012). Introduction: Structural Dynamics and Contemporary Growth Theory. In: Structural Dynamics and Economic Growth. In: Arena, R. and P. Porta (ed.), Structural Dynamics and Economic Growth, Cambridge University Press, New York.

Arrow, K.J. (1962), Economic Welfare and the Allocation of Resources for Invention, In: National Bureau of Economic Research, Inc. (NBER), The Rate and Direction of Inventive Activity: Economic and Social Factors, Princeton University Press.

Cornwall, J. (1977), Modern Capitalism, Oxford: Martin Robertson.

Denison, E.F. (1967), Why Growth Rates Differ: Post-War Experience in Nine Western Countries, Brookings Institute: Washington, DC.

Dixon, R. and Thirlwall, A.P. (1975), A Model of Regional Growth-Rate Differences on Kaldorian Lines, Oxford Economic Papers, 27(2):201-214.

Dutt, A.K. (2006), Aggregate Demand, Aggregate Supply and Economic Growth, International Review of Applied Economics, 20(3):319-336.

Fagerberg, J. (1988), International Competitiveness, The Economic Journal, 98:355-374.

Fiorillo, F. (2001), Rate of growth and sector specialization coevolution in a Kaldorian export-led growth model, Structural Change and Economic Dynamics, 12(1):91-114.

Gouvea, R.R. and G.T. Lima (2010), Structural change, balance-of-payments constraints, and economic growth: evidence from the multisectoral Thirlwall’s Law, Journal of Post-Keynesian Economics, 33(1):169-204.

Gouvea, R.R. and G.T. Lima (2013), Balance-of-payments-constrained growth in a multisectoral Framework: A panel data investigation, Journal of Economic Studies, 40(2):240-254.

Kaldor, N. (1966), Causes of the Slow Rate of Economic Growth in the United Kingdom, Cambridge: Cambridge University Press.

Kaldor, N. (1970), The Case for Regional Policies, Scottish Journal of Political Economy, 17:337-348.

Kaldor, N. (1972), The Irrelevance of Equilibrium Economics, The Economic Journal, 82(328):1237-1255.

Kaldor, N. (1978), The effect of devaluations on trade in manufactures, Further Essays on Applied Economics, London: Duckworth, 99-118.

Lewis, W.A. (1954), Economic Development with Unlimited Supplies of Labour, Manchester School of Economic and Social Studies, 22:139‐191.

McCombie, J.S.L. (1985), Increasing Returns and the Manufacturing Industries: Some Empirical Issues, The Manchester School of Economics and Social Studies, 53(1):55-76.

McCombie, J.S.L. (2011), Criticisms and defences of the balance-of-payments constrained growth model: some old, some new, PSL Quarterly Review, 64(259):353-392.

McCombie, J.S.L. and A.P. Thirlwall (1994), Economic Growth and the Balance-of-Payments Constraint, London: Macmillan Press LTD.

McCombie, J.S.L., M. Pugno and B. Soro (2002), Productivity Growth and Economic Performance: Essays in Verdoorn’s Law, New York: Palgrave Macmillan.

McMillan, M. and D. Rodrik (2012), Globalization, Structural Change, and Productivity Growth, International Food Policy Research Institute (IFPRI), Discussion Paper 01160.

Myrdal, G. (1957), Economic Theory and Underdeveloped Regions, London: Duckworth.

Pasinetti, L. L. (1981), Structural Change and Economic Growth: a Theoretical Essay on the Dynamics of the Wealth of Nations, Cambridge, UK: Cambridge University Press.

Pasinetti, L. L. (1993), Structural Economic Dynamics: a Theory on the Economic Consequences of Human Learning, Cambridge, UK: Cambridge University Press.

Rodrik, D. (2013), Structural Change, Fundamentals, and Growth: an Overview, World Bank country studies on structural change, available at:

Romero, J.P., F. Silveira and F.G. Jaime Jr. (2011), Brazil: structural change and balance-of-payments-constrained growth, CEPAL Review, 105(4):173-195.

Setterfield, M. (2011), The remarkable durability of Thirlwall’s law, PSL Quarterly Review, 64: 393-427.

Silva, E. and A. Teixeira (2008), Surveying Structural Change: Seminal Contributions and a Bibliometric Account, Structural Change and Economic Dynamics, 19:273-300.

Tharnpanich, N. and J.S.L. McCombie (2013), Balance-of-payments constrained growth, structural change, and the Thai economy, Journal of Post Keynesian Economics, 35(4):569-597.

Thirlwall, A. P. (1979[2004]), The Balance of Payments Constraint as an Explanation of International Growth Rate Differences, in: McCombie, J.S.L. and Thirlwall, A.P. Essays on Balance of Payments Constrained Growth: Theory and Evidence, London: Routledge Taylor and Francis Group.

Thirlwall, A. P. (2011), Balance-of-payments constrained growth models: history and overview”, PSL Quarterly Review, 64(259):307-351.

Thirlwall, A. P. and M. N. Hussain (1982), The Balance of Payments Constraint, Capital Flows and Growth Rate Differences Between Developing Countries, Oxford Economic Papers, New Series, 34(3):498-510.

Timmer, M.P., G.J. de Vries, and K. de Vries (2014), Patterns of Structural Change in Developing Countries, GGDC research memorandum, 149.

Verdoorn, P. J. (1949), Fattori che regolano lo sviluppo della produttivita` del lavoro, L’Industria, 1:3-10. English translation by A. P. Thirlwall, in: J.S.L. McCombie, M. Pugno and B. Soro (2002), Productivity Growth and Economic Performance: Essays in Verdoorn’s Law, New York: Palgrave Macmillan.

Young, A. (1928), Increasing returns and economic progress, Economic Journal, 38(152):527-542.



  • There are currently no refbacks.

Copyright (c) 2017 Guilherme Riccioppo Magacho

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.



Sponsored by   

ISSN 2037-3643

Reg. Tribunale di Roma n.377/2009 del 19/11/2009