THIRLWALL’S LAW AND NEW-DEVELOPMENTALISM: WHAT ARE THE LIMITS FOR LONG-RUN GROWTH?

The aim of this article is to argue that New-Developmentalism —understood as an approach to the deep determinants of economic development in which macroeconomic policy regime has a key role in explaining the long-term growth differentials among countries, notably middle-income countries— is not incompatible with Balance of Payments Constrained Growth models pioneered and developed by Professor Thirlwall, but can be considered an extension and improvement of such a class of models in order to incorporate structural change induced by exchange rate overvaluation as the main limit of long-run growth for middle-income dual economies, thereby explaining the so-called middle-income trap.