This paper addresses (I) the transition dynamics incompatibility between the BPCM and the Prebisch-Singer hypothesis (PSH) (II) the causes of cyclical volatility in developing countries. In order to discuss these issues, we expand the Dutt (2002) model adding: (a) a productivity gap dynamics in which the south has a catching-up element; (b) a labor market dynamics, by including a wage curve in the relationship between employment rate and economic activity; and (c) a labor supply dynamics that considers the labor transfer issue between traditional and modern sectors. The result is a four dimensional dynamic model that represents a lagged developing economy constrained by its balance of payments.
- e22 - "Capital; Investment; Capacity"
- e32 - "Business Fluctuations; Cycles"
- o41 - One, Two, and Multisector Growth Models
- o39 - Technological Change: Other
- o31 - Innovation and Invention: Processes and Incentives
- o49 - Economic Growth and Aggregate Productivity: Other
- balance of payments constraints
- economic cycles
- endogenous technical change
- growth cycles
- latin american structuralism
- terms of trade
- thirlwalls law
- Terms of trade
- Economic cycles
- THIRLWALLS LAW
- Balance of payments constraints
- ENDOGENOUS TECHNICAL CHANGE
- Latin American structuralism
- GROWTH CYCLES