Working Paper: NBER ID: w11009
Authors: Peter J. Klenow; Andrés Rodríguez-Clare
Abstract: Externalities play a central role in most theories of economic growth. We argue that international externalities, in particular, are essential for explaining a number of empirical regularities about growth and development. Foremost among these is that many countries appear to share a common long run growth rate despite persistently different rates of investment in physical capital, human capital, and research. With this motivation, we construct a hybrid of some prominent growth models that have international knowledge externalities. When calibrated, the hybrid model does a surprisingly good job of generating realistic dispersion of income levels with modest barriers to technology adoption. Human capital and physical capital contribute to income differences both directly (as usual), and indirectly by boosting resources devoted to technology adoption. The model implies that most of income above subsistence is made possible by international diffusion of knowledge.
Keywords: No keywords provided
JEL Codes: O11; O33; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| international knowledge externalities (O36) | economic growth (O49) |
| investment rates (G31) | long-run relative incomes (F40) |
| international knowledge externalities (O36) | common long-run growth rate (O40) |
| human capital (J24) | income differences (D31) |
| physical capital (E22) | income differences (D31) |
| international diffusion of knowledge (O36) | income above subsistence levels (E25) |
| technology adoption (O33) | income differences (D31) |