The La Marca model revisited: Structuralist goodwin cycles with evolutionary supply side and balance of payments constraints

Danilo Spinola (Corresponding / Lead Author)

    Research output: Contribution to journalArticlepeer-review

    4 Citations (SciVal)


    This research is aimed at investigating the causes of volatility that affect middle-income countries by studying the La Marca model. Drawing from the open-economy Goodwin tradition, this model demonstrates that economic activity, income distribution and accumulation of foreign assets dynamically interact, resulting in a pattern of dampened cycles. The study consists in analyzing the characteristics of the model by initially imposing: (I) a constant real exchange rate; (II) a constant net external asset to capital ratio, which is in line with the balance of payments dominance theory and (III) a fixed income distribution. We then (IV) expand the original model by adding an evolutionary supply-side in which productivity is at the center of the economic dynamic through international technology transfer and the Kaldor-Verdoorn effect. The results show that (1) the model always converges. (2) The restrictions (I) and (II) remove the cyclical component of the model, which highlights a central difference between La Marca and the original Goodwin model. (3) Fixed income distribution leads to a monotonic trajectory that reduces oscillations. (4) The inclusion of productivity dynamics generates new sources of volatility in the relationship between productivity, capacity utilization and net external assets and is in line with the structuralist argument of structural fragility.
    Original languageEnglish
    Pages (from-to)189-212
    Number of pages24
    Issue number1
    Publication statusPublished (VoR) - Feb 2021


    I would like to acknowledge Bart Verspagen, Mary Kaltenberg, two anonymous referees and the editors of Metroeconomica for their fundamental inputs, that very much improved the quality of this manuscript. I thank UNU-Merit and the CatChain project for the institutional and financial support. I bear full responsibility for all opinions and any eventual inaccuracies presented in this paper.

    FundersFunder number
    Horizon 2020 Framework Programme778398


      • growth cycles
      • Kaldor-Verdoorn
      • macroeconomic dynamics
      • structuralism


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