Working Paper: CEPR ID: DP3245
Authors: Roger E. A. Farmer; Amartya Lahiri
Abstract: In this Paper we study the competitive equilibria of a two-country endogenous growth model in which the source of growth is the linearity of technology in reproducible inputs. We begin by showing that in a model with no externalities there is a unique equilibrium; however, there are multiple ways in which the social planner can allocate production plans across countries. We then introduce an externality to human capital and we show that the model has multiple equilibria that can be Pareto-ranked. In many of these equilibria there are perfectly foreseen discrete reallocations of capital from one country to another, accompanied by discrete jumps in growth rates.
Keywords: endogenous growth; open economy
JEL Codes: F21; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| human capital externality (J24) | indeterminacy in growth outcomes (O41) |
| human capital externality (J24) | multiple equilibria (D50) |
| production externalities (D62) | distinct growth paths (O41) |
| location of production (R32) | growth rates (O40) |
| human capital externality (J24) | asymmetric growth patterns (O41) |