TY  - JOUR
AU  - Klenow,Peter J.
AU  - Rodriguez-Clare,Andres
TI  - Externalities and Growth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11009
PY  - 2004
Y2  - December 2004
UR  - http://www.nber.org/papers/w11009
L1  - http://www.nber.org/papers/w11009.pdf
N1  - Author contact info:
Peter J. Klenow
Department of Economics
579 Serra Mall
Stanford University
Stanford, CA  94305-6072
Tel: 650/725-8169
Fax: NA
E-Mail: Pete@Klenow.net

Andres Rodriguez-Clare
University of California at Berkeley
Department of Economics
Berkeley, CA 94720-3880
E-Mail: andres1000@gmail.com
AB  - 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.
ER  -