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Bridging the Barriers: Knowledge Connections, Productivity, and Capital Accumulation

  • R. Quentin Grafton
  • Tom Kompas
  • P. Dorian Owen

The paper explains the large differences in cross-country productivity performance by modeling and testing the effects of social barriers to communication on productivity and capital accumulation. In an optimal growth model, social barriers to communication that impede the formation of knowledge connections are shown to reduce both transitory and steady-state levels of total factor productivity (TFP), per capita consumption, and reproducible capital. A ‘bridging’ parameter in the growth model that lowers the disutility of forming knowledge connections generates testable and dynamic implications about the effects of social barriers on capital, consumption, and productivity. Extensive empirical testing of the theoretical propositions yields a robust and theoretically consistent result — linguistic barriers to communication reduce productivity and capital accumulation. The findings provide a theoretical justification and a robust explanation for cross-country differences in TFP, and fresh insights into how productivity ‘catch up’ may be initiated.

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File URL: https://crawford.anu.edu.au/degrees/idec/working_papers/IDEC04-5.pdf
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Paper provided by International and Development Economics in its series International and Development Economics Working Papers with number idec04-5.

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Length: 42 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:idc:wpaper:idec04-5
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