South-North Convergence from a New Perspective
24 Pages Posted: 29 Nov 2013
Date Written: November 20, 2013
This North-South model of Schumpeterian endogenous growth combines a market, productivity and knowledge effect. A set of various convergent and divergent growth paths is derived that is much richer than in the literature so far. South-North convergence based on North-South technology diffusion through intermediate goods trade is guaranteed if the knowledge effect dominates the productivity effect. Moreover, a larger Southern market expands the area of convergence and can prevent divergence. Not only a larger Southern market size, but also a higher Southern steady state growth rate benefit the North so that convergence is desirable for both, the South and the North.
Keywords: Schumpeter, endogenous growth, technology diffusion, convergence, poverty trap
JEL Classification: F18, O11, O33, O41
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