This paper presents a simple North-South model of endogenous growth, based on learning by doing, which is consistent with the following empirical observations: (i) the price of investment goods relative to consumption goods has been falling for the last 40 years in most industrialized countries,...

This paper presents a two-sector, North-South model of endogenous growth, where the investment goods sector features learning by doing. There are no technological spillovers across countries that are integrated only via goods markets. In equilibrium, South specializes on the consumption sector....