What is the current account response to transitory income shocks such as temporary changes in the terms of trade, transfers from abroad, or fluctuations in production? We propose this new rule: the current account response equals the saving generated by the shock multiplied by the country's...

We show that even in the absence of diminishing returns in production and technological spillovers, international trade leads to a stable world income distribution. This is because specialization and trade introduce de facto diminishing returns: countries that accumulate capital faster than...

Two of the most interesting facts of the postwar international growth experience are (1) the conditional convergence finding that, after controlling for measures of education and government policies, poor countries tend to grow faster than rich ones; and (2) a small group of export-oriented...