Learning Externalities and Economic Growth
It is a well known fact that not all countries develop at the same time. The industrial revolution began over 200 years ago in England and has been spreading over the world ever since. In their paper Barriers to Riches, Parente and Prescott notice that countries that enter the industrial stage later on grow faster than what the early starters did. I present a simple model with learning externalities that generates this kind of behavior. I follow Lucas (1998) and solve the optimization problem of the representative agent under the assumption that the external effect is given by the world leader's human capital.
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- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, March.
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