The Structuralist strongGrowthstrong Model - The University of Vermont.pdfVIP

The Structuralist Growth Model Bill Gibson Abstract This paper examines the underlying theory of structuralist growth models in an eort to compare that framework with the standard approach of Solow and others. Both the standard and structuralist models are solved in a common mathematical framework that emphasizes their similarities. It is seen that while the standard model requires the growth rate of the labor force to be taken as exogenously determined, the structuralist growth model must take investment growth to be determined exogenously in the long run. It is further seen that in order for the structuralist model to reliably converge to steady growth, considerable attention must be given to how agents make investment decisions. In many ways the standard model relies less on agency than does the structuralist. While the former requires a small number of plausible assumptions for steady growth to emerge, the structuralist model faces formidable challenges, especially if investment growth is thought to be determined by the rate of capacity utilization. 1 Introduction The structuralist growth model (SGM) has its roots in the General Theory of Keynes (1936), Kalecki (1971) and eorts by Robinson (1956), Harrod (1937), Domar (1946), Pasinetti (1962) and others to extend the Keynesian principle of eective 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,