---- Acknowledgements -----
A first draft of this paper was prepared for the Conference in honor of Robert E. Lucas Jr. at Clemson University, September 2007. We thank Lorenzo Caliendo for excellent research assistance and Philip Aghion, Tim Besley, Per Krussel, Bob Lucas, Torsten Persson, Andrea Prat, Nancy Stokey and seminar participants at Chicago GSB, Clemson, ECARES, Erasmus School of Economics, LSE, Northwestern and Princeton for useful comments. Garicano acknowledges the financial support of the Toulouse Network on Information Technology. Rossi-Hansberg acknowledges the generous support of the Sloan Foundation. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.