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The Remarkable Durability of Thirlwall’s Law

Trinity College Department of Economics Working Paper No. 11-05

38 Pages Posted: 3 Jun 2011  

Mark Setterfield

New School for Social Research

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2011

Abstract

This paper contemplates the robustness of Thirlwall’s Law, a parsimonious expression that relates long run equilibrium growth in any one region to the product of world income growth and the ratio of the income elasticities of demand for exports and imports. Various extensions of the balance-of-payments-constrained growth model from which Thirlwall’s Law is derived are contemplated. In each case, Thirlwall’s Law is shown to reassert itself as a good approximation of the equilibrium growth rate. It is hypothesized that this robustness helps explain the widespread empirical success of Thirlwall’s Law.

Keywords: Thirlwall’s Law, Balance-of-Payments-Constrained Growth, Export-Led Growth, Demand-Led Growth, Natural Rate of Growth

JEL Classification: O41, E12

Suggested Citation

Setterfield , Mark, The Remarkable Durability of Thirlwall’s Law (June 1, 2011). Trinity College Department of Economics Working Paper No. 11-05. Available at SSRN: https://ssrn.com/abstract=1856696 or http://dx.doi.org/10.2139/ssrn.1856696

Mark Setterfield (Contact Author)

New School for Social Research ( email )

6 East 16th Street
New York, NY 10003
United States

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