Credit constraints and structure: a theoretical model of extractivism and slow-growth dynamics

Vol. 41 No. 3 (2021)

Jul-Sep / 2021
Published July 20, 2021
PDF-English
PDF-English

How to Cite

Gómez-Ramírez, Leopoldo, and Nestor Garza. 2021. “Credit Constraints and Structure: A Theoretical Model of Extractivism and Slow-Growth Dynamics”. Brazilian Journal of Political Economy 41 (3):538-54. https://doi.org/10.1590/0101-31572021-3122.

Credit constraints and structure: a theoretical model of extractivism and slow-growth dynamics

Leopoldo Gómez-Ramírez
Universidad del Norte, Barranquilla, Colombia.
Nestor Garza
California State University Dominguez Hills, California, USA.
Brazilian Journal of Political Economy, Vol. 41 No. 3 (2021), Jul-Sep / 2021, Pages 538-554

Abstract

We develop a theoretical model that explains the relationship between credit constraints and economic growth in the context of a three-sector economy, including an “extractive” sector. The model belongs in the structuralist tradition and it is inspired by the Colombian economy. In contrast to neoclassic development economics models, we prove that: 1) relaxing the credit crunch would foster formal sector growth but it may nevertheless not imply formal employment growth; and 2) the economy can converge to a pattern where the extractive sector increases while the formal one shrinks.

JEL Classification: O11; O41; E24; E26.


Keywords: Credit constraints formal employment extractivism Colombia structuralist economics