Endogenous income elasticities

Authors

  • Fabrizio J. Missio Federal University of Minas Gerais (CEDEPLAR/UFMG), Belo Horizonte

DOI:

https://doi.org/10.13133/2037-3643/18918

Keywords:

balance-of-payments constraint, multi-sectoral Thirlwall’s Law, income elasticities

Abstract

This paper deepens the analysis of the income elasticities of import and export demand in relation to the real exchange rate (RER) within a balance of payments constrained growth framework. It identifies how the RER can affect these elasticities and explores the resulting implications. A key highlight is the RER’s ability to induce structural changes toward more complex and technology-intensive sectors. To illustrate this, a formal multisectoral model is presented, demonstrating the conditions under which a higher RER can alleviate external constraints. Finally, several related considerations are addressed.

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Published

2025-04-26

How to Cite

Missio, F. J. (2025). Endogenous income elasticities. PSL Quarterly Review, 78(312), 51–66. https://doi.org/10.13133/2037-3643/18918

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Section

Special issue on premature deindustrialization and climate change: global North and South perspectives