A structural economic dynamics approach to balance-of-payments-constrained growth

This paper derives a balance-of-payments equilibrium growth rate analogous to Thirlwall's Law from a Pasinettian multi-sector macrodynamic framework. The resulting formula, which we call the Multi-Sectoral Thirlwall's Law, asserts that a country's growth rate of per capita income is directly proportional to the growth rate of its exports, with such a proportionality being inversely (directly) related to sectoral income elasticities of demand for imports (exports). These income elasticities are weighted by coefficients that measure the share of each sector in total imports and exports, respectively. It is shown that several theoretical, empirical and policy implications can be drawn from such a structural economic dynamics approach to balance-of-payments-constrained growth.