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Threshold Externalities in Economic Development


  • Costas Azariadis
  • Allan Drazen


Standard one-sector growth models often have the counterfactual implication that economies with access to similar technologies will converge to a common balanced growth path. We propose an elaboration of the Diamond model that permits multiple, locally stable stationary states. This multiplicity is due to increasing social returns to scale in the accumulation of human capital.

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  • Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
  • Handle: RePEc:oup:qjecon:v:105:y:1990:i:2:p:501-526.

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    References listed on IDEAS

    1. Koenig, Evan F, 1989. "Investment and the Nominal Interest Rate: The Variable Velocity Case," Economic Inquiry, Western Economic Association International, vol. 27(2), pages 325-344, April.
    2. Bernanke, Ben, 1985. "Adjustment costs, durables, and aggregate consumption," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 41-68, January.
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