Technological Diffusion, Convergence, and Growth

Abstract

We construct a model that combines elements of endogenous growth with the convergence implications of the neoclassical growth model. In the long run, the world growth rate is driven by discoveries in the technologically leading economies Followers converge toward the leaders because copying is cheaper than innovation over some range. A tendency for copying costs to increase reduces followers' growth rates and thereby generates a pattern of conditional convergence. We discuss how countries are selected to be technological leaders, and we assess welfare implications. Poorly defined intellectual property rights imply that leaders have insufficient incentive to invent and followers have excessive incentive to copy.