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Title: Capital Mobility in Neoclassical Models of Growth

Author(s): Robert J. Barro, N Gregory Mankiw and Xavier Sala-i-Martin

Publication Date: September 1994

Keyword(s): Capital Mobility, Convergence and Neoclassical Growth

Programme Area(s): International Macroeconomics

Abstract: The neoclassical growth model accords with empirical evidence on convergence if capital is viewed broadly to include human investments, so that diminishing returns to capital set in slowly, and if differences in government policies or other variables create substantial differences in steady-state positions. Open economy versions of the theory predict higher rates of convergence than those observed empirically, however. We show that the open economy model conforms with the evidence if an economy can borrow to finance only a portion of its capital, for example, if human capital must be financed by domestic savings.

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Bibliographic Reference

Barro, R, Mankiw, N and Sala-i-Martin, X. 1994. 'Capital Mobility in Neoclassical Models of Growth'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1019