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Document Type

Open Access Dissertation

Degree Name

Doctor of Philosophy (PhD)

Degree Program

Economics

Year Degree Awarded

2016

Month Degree Awarded

May

First Advisor

J. Mohan Rao

Second Advisor

Mwangi wa Gĩthĩnji

Third Advisor

Shouvik Chakraborty

Subject Categories

Economics | Growth and Development | Social and Behavioral Sciences

Abstract

This dissertation incorporates the investment variable in two alternative post-Keynesian theories, Thirlwall’s Law and The Endogeneity of the Natural Rate of Growth, and then uses them in order to explain the performance of the rate of growth of the Mexican economy during the 1950 – 2012 period.

In chapter two we elaborate an extension of the Thirlwall’s Law model in which exports are not the only source of growth but so is investment. The demand for imports is affected in a negative way when capital accumulation alters the internal structure of economic production to substitute for imports. Then, the rate of growth consistent with a constant trade balance can be increased via raising investment as a share of the GDP.

In chapter three we analyze some empirical applications of Thirlwall’s Law and then we highlight some problems with respect of the omission of the investment variable in the determination of the income elasticity of demand for imports. Then we apply our modified model of the Thirlwall’s Law for the Mexican case for the period 1951 – 2012 to show that the Mexican rate of growth consistent with a constant trade balance was strongly affected by the investment share of the GDP.

In chapter four we analyze the determination of the natural rate of growth of the Mexican economy. We show that the Mexican natural rate of growth is endogenous to the effective rate of growth, but we also show that the different growth regimes, depressive, normal and expansive, are endogeneous to the investment share of the GDP.

Finally, in chapter five we discuss some of the determinants of the investment share of the GDP in the Mexican case. We indicate that a mix of conservative economic policies, the economic liberalization process followed from the mid-eighties and the elimination of the industrialization policy caused a decrease in the rate of investment and a change in its composition that in consequence produced a decrease of both the rate of growth consistent with a constant trade balance and the natural rate of growth.

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