Structural change: Expansion or stagnation?

ABTRACT The paper argues that the alleged irrelevance of Pasinetti’s structural dynamics for the study of the patterns of structural change may be the result of an incomplete understanding of his theoretical project. That project has left open the question of actual dynamics. The paper lays out the basics for approaching actual dynamics, a necessary preliminary for more focused empirical work. It does that developing the most original aspect of Pasinetti’s approach, the integration of the demand side into the analysis of growth and economic development. The analysis of the process of market creation makes explicit what is implicit in the natural system: changes in the patterns of consumption have a counterpart in the development of new markets. In this perspective, we argue that structural change breeds economic expansion when combined with market creation. That is most important to understand the current trends of structural transformation. We highlight the dramatic change between the expansive structural change in the Golden Age and the new tendencies towards stagnation hidden in the latest phase of development of ICTs.