Structural change, balance-of-payments constraint, and economic growth: evidence from the multisectoral Thirlwall`s law

Abstract

This paper contributes to the literature on balance-of-payments constrained growth by investigating how structural change identified with changes in the sectoral composition of exports and imports affects the external constraint We test both the original and a multisectoral version of Thirlwall`s law for a sample of Latin American and Asian countries The original Thirlwall s law is found to hold for all sample countries except South Korea, whereas the multisectoral analogue holds for all of them As the sectoral composition of exports and imports is found to matter for growth we analyze the evolution of each country`s weighted trade income elasticities