Economics Department Working Paper Series

Working Paper Number

2020-11

Journal or Book Title

UMass Economics Working Papers

Publication Date

2020

Abstract

Developing economies with high levels of open or hidden unemployment face structural transformation problems. Unlike in mature economies there are no structural aggregate demand problems, and sustained aggregate demand stimulus can lead to a profit squeeze in the modern sector and deindustrialization. Adaptations of functional finance to developing economies should aim to stabilize the level and composition of demand at values that are consistent with a target rate of growth of the modern sector. Populist temptations, however, may lead to deindustrialization.

License

UMass Amherst Open Access Policy

Included in

Economics Commons

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