‘Disarticulation’ as a Constraint to ‘Wage-led Growth’ in Dual- Economies

Much of the recent interest in the relationship between growth and distribution has focused on advanced economies and neglected issues of development and structural transformation. The purpose of this paper is to make a contribution to this gap by arguing that, even in the short-run, some of the conclusions from neo-Kaleckian models may not be robust to developing country contexts with extreme income inequality and correspondingly polarized patterns of consumption. This argument is supported by a review of, amongst other, Kalecki’s writing on development and a two-sector model building on Razmi et al (2012). The paper can be interpreted as a call for greater consideration of structural heterogeneity in extending the analysis of advanced economies to developing economies and as a caution against calls for general aggregate demand policy, in this case shifts in income distribution, to address structural transformation problems