A Two-Country Model of Endogenous Growth

Roger Farmer and Amartya Lahiri

No 3245, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this Paper we study the competitive equilibria of a two-country endogenous growth model in which the source of growth is the linearity of technology in reproducible inputs. We begin by showing that in a model with no externalities there is a unique equilibrium; however, there are multiple ways in which the social planner can allocate production plans across countries. We then introduce an externality to human capital and we show that the model has multiple equilibria that can be Pareto-ranked. In many of these equilibria there are perfectly foreseen discrete reallocations of capital from one country to another, accompanied by discrete jumps in growth rates.

Keywords: Endogenous growth; Open economy (search for similar items in EconPapers)
JEL-codes: F21 F41 (search for similar items in EconPapers)
Date: 2002-03
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (1)

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Journal Article: A Two-Country Model of Endogenous Growth (2005)
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