NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Factor Mobility and Income Growth: Two Convergence Hypotheses

Assaf Razin, Chi-Wa Yuen

NBER Working Paper No. 5135 (Also Reprint No. r2181)
Issued in May 1995
NBER Program(s):   EFG   IFM

While technologies and policy fundamentals are presumably different internationally, inducing differences in growth rates, capital mobility is shown to be a powerful force in achieving complete growth rate equalization across countries. We provide evidence in support of this effect, showing that restrictions on capital flows tend to make individual country growth rates more divergent. In the context of regional growth, however, labor mobility is shown to be capable of generating income level equalization across regions in the presence of knowledge spillovers. Some supporting evidence is found for this effect, showing that restrictions on labor flows tend to make individual region/country per capita income more divergent.

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Document Object Identifier (DOI): 10.3386/w5135

Published: Review of Development Economics, vol.1, no.1, March 1997.

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