Open AccessBALANCE OF PAYMENTS CONSTRAINED, STRUCTURAL CHANGE AND NATIONAL INNOVATION SYSTEM
Author(s) -
Douglas Alcântara Alencar
Publication year - 2019
Publication title -
cadernos cepec
Language(s) - English
Resource type - Journals
ISSN - 2238-118X
DOI - 10.18542/cepec.v7i7-12.7076
Subject(s) - economics , balance of payments , income elasticity of demand , measures of national income and output , constraint (computer aided design) , macroeconomics , classical economics , monetary economics , econometrics , mathematics , geometry
There is one major criticism about balance of payment constrained growth models, which states that the long run growth is determined by the average rate of exports in relation with the ratio of income elasticity of imports. If the income elasticity of imports is bigger than the average rate of exports, economic growth will be constrained. The empirical evidence about this approach, known as Thirlwall’s Law, can be found in several papers as Thirlwall and Hussain (1982), McCombie (1989), Moreno-Brid (2003), Lima and Carvalho (2009), and Britto and McCombie (2009). However, the approach does not have a complete consistent explanation about why the external constraint occurs. Some authors have tried to explain why the countries have their growth constrained using the Systems of Innovation approach, as Silveira, Romero and Britto (2010), Missio and Jayme Jr (2011), Jayme Jr and Resende (2009), and Silva and Hasenclever (2010). In their point of view, the main determinant of the deterioration of the terms of trade in an economy lies in the lack of maturity of its National Innovation System.