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18 L. SCHLOGL AND A. SUMNER
2. McMillan and Rodrik (2011) find that countries with a large share of exports
in natural resources tend to experience growth-reducing structural trans-
formation and, even if they have higher productivity, cannot absorb surplus
labor from agriculture. In a similar vein, Gollin et al. (2016), too, argued
that natural resource exports drive urbanization without structural trans-
formation because natural resources generate considerable surplus which is
spent on urban goods and services, and urban employment tends to be in
non-traded services. McMillan and Rodrik (2011) also find that an under-
valued (competitive) exchange rate, which operates effectively as a subsidy on
industry and labor market characteristics (so labor can move across sectors
and firms easily), leads to growth-enhancing structural transformation.
3. There are a set of methodological questions too. Syrquin (2007) briefly
identifies such questions and they include defining what is meant by “sec-
tors” and thus what ST means (inter- or intra-depends on the breadth of
definitions of sectors) and the blurring between “services” and “manufac-
turing” due to technological advances and outsourcing.
4. Targetti (1988) highlights Kaldor’s contribution in cumulative causation
rather than timeless “equilibrium.”
5. Kaldor also took the two-sector model to be applicable to trade between
developing and developed countries through the export of agriculture
products from the former and import of manufactured goods from the
later. He argued that international trade could make developing countries
poorer because liberalization would increase agriculture exports which
are produced at decreasing returns that are not sufficient to compensate
for the loss of manufacturing exports, which is a sector which produces
increasing returns.
6. In contrast, the neoclassical position on growth and employment is based
on Okun’s (1962) law which states that changes in the GDP growth rate
and rate of unemployment have a negative association. This was critiqued
for not accounting for changes that could be due to alterations in labor
force participation (see Basu & Foley, 2013).
7. Thirlwall (1979) added that the rate of economic growth will not exceed the
rate of growth of exports to the income elasticity of demand for imports. In
short, he argued that there is a balance of payments constraint on growth.
references
Basu, D., & Foley, D. K. (2013). Dynamics of output and employment in the
US economy. Cambridge Journal of Economics, 37(5), 1077–1106.
Chenery, H. B. (1960). Patterns of industrial growth. The American Economic
Review, 50(4), 624–654.
Chenery, H. B. (1975). The structuralist approach to development policy. The
American Economic Review, 65(2), 310–316.
Disrupted Development and the Future of Inequality in the Age of Automation