PSL Quarterly Review

Structural change, social inclusion, and environmental sustainability: New perspectives and policies in economic development

Fernando Isabella — 2024-10-14

This special issue addresses the challenges of the international economy, focusing on structural change, social inclusion, and environmental sustainability. It brings together contributions from senior and young scholars, many from Latin America, to explore multidimensional issues like inequality, geopolitical tensions, financial instability, environmental crises, and technological asymmetries. The selected papers, initially presented at the 1st International Workshop on Structural Change, Social Inclusion, and Environmental Sustainability, provide diverse perspectives on topics such as economic policy for a fair transition, centre-periphery dynamics, and the intersection of gender, labour, and economic growth. These works aim to foster collaboration between experienced and emerging voices, enriching the conversation around economic development through pluralist approaches.

The social reproduction of labour and macro theory

Mark Setterfield — 2024-10-14

The thesis advanced in this paper is that like class and technical change, gender and the social reproduction of labour routinely shape demand formation and/or the supply side of the economy — and as such, reference to the gendered social reproduction of labour should be more routinely incorporated into macro-theoretic analysis. The argument is developed with reference to two familiar issues in heterodox macrodynamics: reconciliation of the equilibrium and natural rates of growth; and the relationship between distribution and growth. Using an existing feminist macro model as a point of departure, it is shown that proper account of the social reproduction of labour and its gendered character creates important new insights into both the processes by which the equilibrium and natural rates of growth might be equalized, and the underlying character (wage- versus profit-led) of the relationship between distribution and growth.

Complex systems: Introductory notes on a dialogue among political economy, evolutionary economics and physics

Eduardo da Motta e Albuquerque — 2024-10-14

Complex systems may be a useful methodological tool to address “challenges for research in development”. There is a huge and growing literature on complex systems and economic theory that might be related to early intuitions of classical economists on the workings of capitalist economies. Kondratiev and Slutsky have worked with features of complex systems – how technological revolutions change the system. This may underlie one peculiarity of capitalism – a complex system that changes its level of complexity over time. The inclusion of the periphery broadens its turbulent nature: a complex system that combines regions with self-organization dynamics – the center – and regions with random behavior – the periphery.

On Marx and accounting: An empirical study of the transformation of values into prices of production in the Brazilian contemporary economy, 2010-2022

Leonardo Segura Moraes — 2024-10-14

The purpose of this paper is to present some notes on the contemporary Brazilian economy between 2010 and 2022, translating items from the value added statement (VAS) and the balance sheet of a sample of 48 companies that make up the Bovespa Index (Ibovespa, in Portuguese) portfolio into Marxist economic theory.

The information was obtained from InvestSite (https://www.investsite.com.br/) and Economatica (https://economatica.com/) databases. In this sense, we observed some general trends and countertrends of real competition in the Brazilian economy, based on the empirical formulation of the concepts of constant capital, variable capital, surplus-value, turnover of capital, cost-price, price of production, rate of profit, and rate of surplus-value. In this way, we hope to contribute to a research agenda on the criteria for production and appropriation of surplus-value in Brazil, as well as to use the Marxian procedure of transformation of values into prices of production as a macroeconomic tool.

Variety, technological intensity, and economic growth at the regional level in Argentina

Florencia Barletta — 2024-10-14

The objective of this paper is to study the relationship between productive structure and economic performance at the subnational level in Argentina. Based on a dataset at the subnational level, we study the impact on economic growth of three types of productive patterns: i) productive efficiency (W), ii) related variety (RV), and iii) unrelated variety (UV). In addition, we explore to what extent this impact is conditioned by the level of technological intensity of productive structures. Results show that unrelated variety positively impacts on economic growth when it happens within a context of high levels of technological intensity of productive structures. When this is not the case, the impact might even be negative, or there may be no impact at all.

Currency substitution in Argentina, 2003-2019: An evaluation of alternative explanations

Santiago Graña-Colella — 2024-10-14

Currency substitution defined as the use of foreign currency in the domestic economy is a relatively common phenomenon in developing countries. While mainstream economics has analyzed it in some detail, the same is not the case in heterodox economics. This paper proposes an analytical approach to evaluate the effects of currency substitution and its relationship with exchange rate dynamics; it provides an empirical investigation of orthodox and alternative views for the case of Argentina. The orthodox view emphasizes the role of fiscal deficits financed by monetary emissions, while alternative views emphasize the importance of external vulnerabilities, both associated with current and financial account deficits as the source of currency substitution. We find some support in favor of the alternative or heterodox perspective on currency substitution or dollarization.

Structural change, commodity dependence and middle-income trap: Emerging approaches to a traditional agenda

Fernando Isabella — 2024-10-14

The objective of this paper is to revisit key themes of development literature in the light of novel emerging approaches. Applying complexity economic tools, evidence is presented to argue that, along the development trajectory of countries, a complexity increase, to be sustainable, must go hand in hand with a departure from their productive historical path, in the form of unrelated diversification. Also, it is argued that successful trajectories must avoid the middle-income trap (MIT), which is shown to stem from the interplay of supply and demand factors. Finally, building on balance of payments constrained growth literature, a theoretical model is proposed to explain the high prevalence of MIT situations among commodity-dependent countries. It is suggested that this phenomenon arises from the interaction of commodity price volatility and real exchange rates, which affects the accumulation of sophisticated productive capabilities.

Society matters: A post-Keynesian approach to economic development

Pablo Marmissolle — 2024-10-14

This paper discusses methodological individualism and the perceived “need” for microfoundations in economic theory. It argues that the persistent focus on microfoundations has led a large part of the field to overlook the complexity of social interactions, the relevance of historical processes, and the characteristics of each society in understanding economic growth and development. The paper suggested focusing on social foundations as an alternative to microfoundations that is particularly relevant for studying economic development processes. It proposes framing the post-Keynesian view of demand-led growth and distribution-led growth within a conceptual framework of socio-economic development as a valid approach, consistent with social foundations, to understand a phenomenon as complex and multi-causal as development.

Mitigating climate impacts incentives: An analysis of green investments in South America

Anna Carolina Martins — 2024-10-14

The vulnerability of countries related to climate change is driven by different conditions, with geographical location and lack of adequate infrastructure making South America especially vulnerable. Research highlights the importance of South American forests in mitigating climate change. The increasing frequency of climate events calls for preventive attitudes, focusing on sustainable financing. Developed countries have a particular responsibility to support developing countries in addressing the impacts of climate change. A recent study highlights the importance of foreign investment flows in BRICS countries. The article aims to compare the flows of foreign investments between different countries in South America in 2010, 2015, and 2020, using the theory of economic social networks to explore the financial relationships between them. The results indicate interesting changes in the flow of green investments for climate change mitigation, especially in South American countries.

Green innovation in a balance-of-payments constraint growth model for developing economies with capital inflows: The Latin America scenario

Leonardo Flauzino de Souza — 2024-10-14

The main purpose of the paper is to build a balance of payments constraint model with capital inflows, where green innovations are inducers of the structural change process. The main results indicate that green R&D can reduce the growth rate of natural resource use. On the other hand, green structural change will only occur if foreign direct investment has spillover effects on green R&D.

The Solow residual, a distributional approach: The case of Chile, 1985-2019

Fernando Villanueva Melo — 2024-10-14

The primary goal of this paper is to present a distributive proposal for reinterpreting Solow’s residual and apply it within the Chilean context. We argue that Solow’s residual can only indirectly capture technological phenomena. This critique draws upon the contribution of Felipe and McCombie (2020), who contend that production functions merely reflect an identity account. Hence, the so-called Total Factor Productivity (TFP) mirrors the dynamic of real wages and the rate of profit.

We adopt a descriptive approach to estimate and decompose the Solow residual growth for the Chilean economy, to discern the origins of distributional changes between 1985 and 2019. A key patterns is that throughout almost the entire period, the dynamic of the Solow residual is closely intertwined with fluctuations in the profit rate. Additionally, we decompose the profit rate to highlight that the decline in the Chilean economy’s profit rate stems from both distributional and technological factors.