The Remarkable Durability of Thirlwall’s Law
Trinity College Department of Economics Working Paper No. 11-05
38 Pages Posted: 3 Jun 2011
Date Written: June 1, 2011
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: Suggested Citation