Long Run Policy Analysis and Long Run Growth

The wide cross-country disparity in rates of economic growth is the most puzzling feature of the development process. This paper describes a class of models in which this heterogeneity in growth experiences can be the result of cross-country differences in government policy. These differences can also create incentives for labor migration from slow-growing to fast-growing countries. In the models considered, growth is endogeneous despite the absence of increasing returns because there is a "core" of capital goods that can be produced without the direct or indirect contribution of factors that cannot be accumulated, such as land.