#Double-Edged Transition: Structuralist Insights on Industry Formation and Divergent Trade Effects in the Global Economy

#Abstract

This study develops a two‑region Stock‑Flow Consistent (SFC) macroeconomic model to examine the dynamics of clean (“green”) and dirty (“conventional”) capital formation between a stylized Global North (DCEs) and Global South (resource‑dependent ECEs) under conditions of structural imbalance. Building on Godley and Lavoie’s OPEN model, and extending the frameworks of Dunz & Naqvi (2016) and Leoni et al. (2023), we introduce key North–South asymmetries: an unequal fixed exchange rate, higher Southern import propensities, and critical raw material dependence of the North on Southern exports. The model distinguishes clean and dirty capital stocks, associated loan structures, and endogenous productivity growth, while capturing real‑financial linkages, trade, and environmental impacts via carbon intensity functions tied to capital composition.

Our results highlight that designs for green industrial policy must account for structural trade and global imbalance to avoid “green colonialism” and rebound effects that undermine global decarbonization. The model provides a flexible, parsimonious tool for analysing policy interactions between industrial transformation, trade dependence, and climate outcomes in an unequal global economy.

#The full paper with Almeida Bueno and Condori can be obtained on request. Kesse: https://www.researchgate.net/profile/Louis_Kesse Bueno Almeida: https://www.linkedin.com/in/lucca-almeida-bueno-86a618182/ Condori:

#Acknowledgments We are incredibly thankful to Joao Macalos' sfcr package. It helped handling the vast amount of equations and improved troubleshooting the model a lot. Moreover, we are very thankful to Winnie Godley and Marc Lavoie for providing such a transparent modelling approach in Monetary Economics. The combination of the two enabled us to fulfil our ambitious endeavour to a somehow satisfactory extend.

sfcr: https://cran.r-project.org/package=sfcr Godley, Lavoie (2012): https://doi.org/10.1057/9780230626546