International convergence and local divergence

This work presents a north-south endogenous-growth model that reproduces some recent EU stylized facts: convergence between countries, divergence between the same countries, more spatial concentration of economic activity and higher growth rates. We claim that the ongoing technological reduction of transaction costs can conceivably spur those phenomena, specially if a regional productive duality within the less-developed countries were reinforced by a biased incidence of that fall in transaction costs. A key element is Grossman and Helpman's complementarity between innovation and imitation. The channels that allow for higher growth-rates are migrations and scale-effects in the industrialized regions of the poorest countries.