Ecological Transition and Structural Change: A New-Developmentalist Analysis

By Giulio Guarini, Jose Luis Oreiro

PKES Working Paper 2223

October 2022

The article aims to analyze the ecological transition and the structural change by considering the role of Medium-Income Trap (MIT) with respect to exchange rate overvaluation and (re)industrialization, according to the structuralist-New Developmentalist Approach. The ecological challenges can be faced by an ecological transition based on Ecological Technological Progress and Ecological Structural Change (ESC). The ESC can be represented by the increase of the share of green activities in output for increasing the environmental efficiency of the economy. The theoretical core of the new developmentalism is the tendency of overvaluation of real exchange rate for middle income countries whose sources are the Dutch disease (and the growth with external saving strategy). This fact generates the MIT concerning the negative impact of overvaluation real exchange rate on the industrial development. Thus, we analyze how the ESC interact with the drivers of overvaluation exchange rate by carrying out a post-Keynesian model based the Structuralist-New Developmentalist features. In this perspective, we integrate the issue of the achievement of the environmental targets as indicated by the Climate International Conferences and by the UN initiative of the Sustainable Developments Goals, to the structural change necessary for the economic catching-up of the middle income (and/or developing) countries.

Keywords: Ecological Transition, Structural Change, Dutch-Disease, New-Developmentalism

JEL classification: O11 O14 Q56 Q57