Abstract
Professor Kaldor has been a long standing critic of the application of neo-classical modes of thought to the analysis of economic growth and development. In recent years, in particular, he has followed the line of Myrdal [1] in attacking the predictions of neo-classical theory that regional (national) growth rate differences will tend to narrow with trade and the free mobility of the factors of production. The essence of the argument is that once a region gains a growth advantage it will tend to sustain that advantage through the process of increasing returns that growth itself induces—the so-called Verdoorn effect [2]. The fullest statement of Kaldor’s views at the regional level is contained in a lecture to the Scottish Economic Society published in 1970 [3]. Unfortunately the model he presents is purely verbal and lacks the rigour and precision that one normally associates with Kaldor. The purpose here is to attempt to formalize the model in order to clarify its structure,1 and to consider such questions as: the role of the Verdoorn effect in contributing to regional growth rate differences; whether regional growth rate differences will tend to narrow or diverge through time; and how policies of regional ‘devaluation’ can raise a region’s growth rate.2
First published in Oxford Economic Papers, July 1975 (with R. Dixon).
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References
Myrdal, G., Economic Theory and Underdeveloped Regions, Duckworth, 1957d.
Verdoorn, P. J., ‘Fattori che Regolano lo Sviluppo della Produttivita del Lavoro’, L’Industria, 1949; translation by G. and A. P. Thirlwall available on request.
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Dixon, R., Studies in the Structure and Growth of the Regions of the U.K., unpublished doctoral dissertation, University of Kent, 1973.
Thirlwall, A. P., ‘Regional Economic Disparities and Regional Policy in the Common Market’, Urban Studies, Feb. 1974.
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© 2015 A.P. Thirlwall and R. Dixon
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Thirlwall, A.P. (2015). A Model of Regional Growth Rate Differences on Kaldorian Lines. In: Essays on Keynesian and Kaldorian Economics. Palgrave Studies in the History of Economic Thought Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137409485_13
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DOI: https://doi.org/10.1057/9781137409485_13
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