Page - (000028) - in Disrupted Development and the Future of Inequality in the Age of Automation

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.