We revisit Western Europe’s record with labor-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and...

Developing countries are vulnerable to the adverse effects of climate change, yet there is disagreement about what they should do to protect themselves from antic- ipated damages. In particular, it is unclear what the optimal balance is between investments in traditional productive capital...

Economies at early stages of development are often shaken by abrupt changes in growth rates, whereas in advanced economies growth rates tend to be relatively stable. To explain this pattern, we propose a theory of technological diversification. Production makes use of different input varieties,...

In this paper we have built a model of financial intermediation that explains the GDP variability pattern of an economy during the development process. In our model, per capita is more volatile in the middle-income economies than in both low and high-income economies. We show that, if the model...

Convergence concerns poor economies catching up with rich ones. At is- sue is what happens to the cross sectional distribution of economies, not whether a single economy tends towards its own steady state. It is the latter, however, that has preoccupied the traditional approach to con- vergence...

In this paper we distinguish different “qualities” of FDI to re-examine the relationship between FDI and growth. We use ‘quality’ to mean the effect of a unit of FDI on economic growth. However this is difficult to establish because it is a function of many different country and project...

The recent work on misallocation argues that aggregate productivity in poor countries is low because various market frictions prevent marginal products from being equalized. By focusing on such allocative inefficiencies, misallocation is construed as a purely static phenomenon. This paper argues...

This paper explores the role of knowledge flows and TFP growth by using direct survey data on knowledge flows linked to firm-level TFP growth data. Our knowledge flow data correspond to the kind of information flows often argued, especially by policy-makers, as important, such as within the...

Are individuals more sensitive to losses than gains in macroeconomic growth? Using subjective well-being measures across three large data sets, we observe an asymmetry in the way positive and negative economic growth are experienced, with losses having more than twice as much impact on...

This paper attempts to draw lessons for the New Economy from what economists know about technology dissemination and economic growth. It argues that what is most notable about the New Economy is that it is knowledge-driven, not just in the sense that knowledge now assumes increasing importance...