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The Great Divergence: A Network Approach

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  • Ines Lindner
  • Holger Strulik

Abstract

We present a multi-country theory of economic growth in which countries are connected by a network of mutual knowledge exchange. Knowledge in any country depends on the human capital of the countries it exchanges knowledge with. The diffusion of knowledge throughout the world explains a period of increasing world inequality after the take-off of the forerunners of the industrial revolution, followed by decreasing relative inequality. Knowledge diffusion through a Small World network explains the ‘New Kaldor facts’ and produces an extraordinary diversity of country growth performances, including the overtaking of individual countries in the course of world development.

Suggested Citation

  • Ines Lindner & Holger Strulik, 2015. "The Great Divergence: A Network Approach," CESifo Working Paper Series 5638, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5638
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    References listed on IDEAS

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    More about this item

    Keywords

    networks; knowledge diffusion; economic growth; world income distribution;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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