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Factor Mobility and Income Growth: Two Convergence Hypotheses

  • Assaf Razin
  • Chi-Wa Yuen

While technologies and policy fundamentals are presumably different internationally, inducing differences in growth rates, capital mobility is shown to be a powerful force in achieving complete growth rate equalization across countries. We provide evidence in support of this effect, showing that restrictions on capital flows tend to make individual country growth rates more divergent. In the context of regional growth, however, labor mobility is shown to be capable of generating income level equalization across regions in the presence of knowledge spillovers. Some supporting evidence is found for this effect, showing that restrictions on labor flows tend to make individual region/country per capita income more divergent.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5135.

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Date of creation: May 1995
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Publication status: published as Review of Development Economics, vol.1, no.1, March 1997.
Handle: RePEc:nbr:nberwo:5135
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