Growth theory is currently changing directions. The orthodox neoclassical approach is being modified and extended by models of endogenous growth. This volume provides a survey of the topic, along with fresh contributions in the field.Growth performance differs widely among countries and, as demonstrated in this volume, the usual empirical tests of convergence of growth rates are blurred by Galton's classical fallacy of regression to the mean. More direct empirical methods show a tendency towards divergent growth rates. One of the theoretical contributions argues that divergent growth experiences are better accounted for by the new growth theory than by the old. Endogenous growth models may give rise to multiple equilibria. Economies with identical structures may therefore have different growth rates. Moreover, judging theories by simple correlations may be flawed if the shocks are not properly accounted for. This volume also shows how international coordination across countries may be needed to promote growth due to international spillover effects. An important insight of the new theory is that economic institutions and short-term policies have long-run effects on growth.
Other contributions in this volume cover aspects such as growth effects of different trade, tax and public investment policies, as well as lobbying activities. Moreover, the relationships between growth, talent and income distribution are explored from different perspectives. The emphasis is on the effects of egalitarianism both within and across generations.
Preface: Torben M. Andersen and Karl O. Moene.
1. On Endogenizing Long-Run Growth: Peter J. Hammond (Stanford University) and Andres Rodríguez-Clare.
2. Galton's Fallacy and Tests of the Convergence Hypothesis: Danny Quah (London School of Economics).
3. A Dynamic Model of Investment and Endogenous Growth: Mervyn King (Bank of England and London School of Economics) and Mark Robson (London School of Economics).
4. Permanent International Productivity Growth Differentials in an Integrated Global Economy: Willem Buiter (Yale University) and Kenneth Kletzer (University of California, Santa Cruz).
5. Growth, Human Capital Spillovers and International Policy Cooperation: Keith Blackburn (University of Southampton) and Morten Ravn (University of Aarhus).
6. Optimal Saving, Interests and Endogenous Growth: Thorvaldur Gilfason (University of Iceland).
7. Trade, Human Capital Accumulation and Growth in an Under-developed Economy: Tuomas Saarenheimo (University of Helsinki).
8. Egalitarianism and Growth: Jonas Agell (University of Uppsala) and Kjell Erik Lommerud (University of Bergen).
9. Talent, Growth and Income Distribution: Ragnar Torvik (University of Oslo).
10. Living with Lobbying: A Growth Policy Co-opted by Lobbyists can be Better than No Growth Policy at All: Knut Anton Mork (Norwegian School of Management).
11. Dynamic Analysis of an Endogenous Growth Model with Public Capital: Koichi Futagami (Ritsumeikan University), Yuichi Morita (Osaka University) and Akihisa Shibata (Osaka City University).