Economic Structure, International Income Differentials and Long-Run Growth

In a well-known paper on the structure of development, Leontief (1963) showed that a country′s degree of economic development could be assessed by the relative completeness of its economic structure. This pattern of development is modelled in this paper. Within a context of international trade, and assuming that the world distribution of labor is given, the model yields that a sufficiently large differential between the economic structures of developed (Northern) and underdeveloped (Southern) economies induces Southern countries to accept lower prices for their basic goods and endure lower incomes. Economic diversification in the South is analysed as an outcome of technological imitation. The model yields that, even if technological knowledge is a public good, a minimum level of quality education is necessary for long-run growth to take place in the South.