CenterPeriphery Model of Growth Under Structuralism Paradigm

1
Center-Periphery Model of GrowthUnder
Structuralism Paradigm

• Econ 403 Economic Development
• Sonoma State University
• Prof. Carlos A. Benito

2
Topics for today
In studying industrial-import substitution you
we will encounter the following terms

• Center-Periphery
• Raul Prebisch
• International Terms of Trade
• Industrialization
• Import Tariffs Quotas
• Export Taxes
• Investment Planning

• Manufactures for Domestic Markets
• Infant Industries
• Protection Rate
• Import of Capital Equipment
• UNCTAD

3
Center Periphery International Trade Structure
Periphery
Center
Agriculture, Mining, Fuels
Manufactures
How DoesTrade Structure affect Growth and
Development?
4
Center-Periphery Model
Periphery Primary-Export Economy
L
K
Px/Pm
GDP
C
X
M
I
I
I
X
M
C
GDP
Center Industrial economy
L
NR
5
International Terms of Trade hypothesis
X.px M.pm M X.px/pm ITT px/pm
International Terms of Trade
years
6
Explaining Trend in International Terms of
Trade Engel Demand Curve
Spent in Food
Food Consumption
Family Income
Family Income
7
Periphery growth modelA stylized interpretation
pmgtpm
Y(K)
Y,X,M
d.K
M(Y) for pm
M(Y) for pmgtpm)
K
K1
K0
pf(t) dp/dt gt 0
X pm.M Mm.Y
8
Model Specification

• Production Function
• Yt f(Kt)
• Capital Accumulation
• Kt-1 Kt dKt It
• Behavior
• It fMt
• Mt m.Yt
• Equilibrium condition
• Mt .X .pm/px, if px 1 then, X t
  M.pm

9

• By definition
• dY/Y dK/K
• dK/K I/(1-d) fMt /(1-d) f.X/pm /(1-d)
• dK/K f m.A/(1-d)

f m.A.K /(1-d) /K
10
Harrod-Domar s Growth Model No steady state
Y
Ya.K
Constant rate of growth
S s.y s.a.K
d.K
K
11
Solows Growth Model Steady State
y
yf(k)
y0
(nd)k
s.ys.f(k)
k
k0
12
Periphery growth modelA stylized interpretation
pmgtpm
Y(K)
Y,X,M
d.K
M(Y) for pm
M(Y) for pmgtpm)
K
K1
K0
pf(t) dp/dt gt 0
X pm.M Mm.Y