The Knowledge-Diffusion Bottleneck in Economic Growth and Development

Staley, Mark (2018): The Knowledge-Diffusion Bottleneck in Economic Growth and Development.

Abstract

If learning and teaching were easy, the whole world would be developed and frontier knowledge would spread quickly. But learning is difficult and there is a finite capacity for teaching. The concept of a knowledge-diffusion ``bottleneck'' can be used to explain why there is a negative correlation between per-capita income growth rates and fertility rates, especially amongst countries that are in the early stages of industrialization. It can also explain why income distributions in rich countries have power-law tails (both upper and lower) and why income growth rates are independent of scale. A simple model of knowledge diffusion is calibrated to the observed paths of structural transformation in newly-industrializing countries. The resulting parameters are found to be consistent with the tail exponents seen in U.S. income data, suggesting a common mechanism of knowledge diffusion operating in developing countries and fully-developed countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Growth, Diffusion, Development, Bottleneck
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General

References

Alfaranoa, S., Milakovic, M., Irlex, A., Kauschkec, J. (2012) A Statistical Equilibrium Model of Competitive Firms. \emph{Journal of Economic Dynamics and Control} $\bm{36}$: 136-149.

Alvarez, F., Buera, F., Lucas, R. (2008) Models of Ideas Flows. NBER Working Paper no. 14135.

Bloom, N., Jones, C., Van Reenen, J., Webb, M. (2017) Are Ideas Getting Harder to Find? NBER Working Paper No. 23782.

Bozyk, P. (2006). \emph{Newly Industrialized Countries.} Globalization and the Transformation of Foreign Economic Policy. Ashgate Publishing, Burlington, Vt.

Champernowne, D.G. (1953) A Model of Income Distribution. \emph{The Economic Journal} $\bm{63}$: 318-351.

Chotikapanish, D., Rao, D., Tang, K. (2007) Estimating Income Inequality in China using Grouped Data and the Generalized Beta Distribution. \emph{The Review of Income and Wealth} $\bm{53}$: 127-147.

Cox, D., Miller, H. (1995) \emph{The theory of stochastic processes.} Chapman and Hall, London.

Feenstra, R. C., Inklaar, R., and Timmer, M. (2015), The Next Generation of the Penn World Table. \emph{American Economic Review}, $\bm{105(10)}$: 3150-3182. Available for download at www.ggdc.net/pwt.

Feyrer, J. (2011) The US productivity slowdown, the baby boom, and management quality. \emph{Journal of Population Economics} $\bm{24}$: 267-284.

Fisher, D.S. (2011) Leading the Dog of Selection by its Mutational Nose. \emph{Proceedings of the National Academy of Sciences} $\bm{108}$: 2633-2634.

Fisher, R.A. (1937) The Wave of Advance of Advantageous Genes. \emph{Annals of Eugenics} $\bm{7}$: 335-369.

Gabaix, X. (2009) Power Laws in Economics and Finance. \emph{Annual Reviews of Economics} $\bm{1}$: 255-293.

Grindrod, P. (1996). \emph{The Theory and Applications of Reaction Diffusion Equations: Patterns and Waves.} Oxford University Press, Oxford.

Guillen, M (2003). \emph{Multinationals, Ideology, and Organized Labor.} The Limits of Convergence. Princeton University Press, Princeton.

Guvenen, F., Karahan, F., Ozkan, S., Song, J. (2015) What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Risk? NBER Working Paper, No. 20913.

Haines, M. (1994) The Population of the United States, 1790-1920. NBER Historical Paper \#56.

Haines, M. (2008) Fertility and Mortality in the United States. \emph{EH.Net Encyclopedia}, edited by Robert Whaples, March 19. URL http://eh.net/encyclopedia/fertility-and-mortality-in-the-united-states/

Harberger, A. (1998) A Vision of the Growth Process. \emph{The American Economic Review} $\bm{88}$: 1-32.

Hsieh, C. (2002) What Explains the Industrial Revolution in East Asia? Evidence from the Factor Markets. \emph{The American Economic Review} $\bm{92}$: 502-526.

Hongler, M., Gallay, O., Hashemi, F. (2016) Impact of Imitation on the Dynamics of Long Wave Growth. Working Paper.

Jones, C. (1995). Time Series tests of Endogenous Growth Models. \emph{Quarterly Journal of Economics} $\bm{110}$: 495-525.

Jones, C. (1999) Growth: With or Without Scale Effects? \emph{American Economic Review} $\bm{89}$: 139-144.

Jones, C., Romer, P. (2010). The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital. \emph{American Economic Journal: Macroeconomics} $\bm{2}$: 224-245.

Karahan, F., Ozkan, S. (2013) On the persistence of income shocks over the life cycle: Evidence, theory, and implications. \emph{Review of Economic Dynamics} $\bm{16}$: 452-476.

Kolmogorov, A., Petrovsky, I., Piscounov (1937) Etudes de l'equations de l diffusion avec croissance de la quantite de matiere et son application a un problem biologique. \emph{Moscou Univ. Bull. Math. A.} $\bm{1}$: 1-25.

K\"onig, M.D., Lorenz, J., Zilibotti, F. (2016) Innovation vs Imitation and the Evolution of Productivity Distributions. \emph{Theoretical Economics} $\bm{11}$: 1053-1102.

Krugman, P. (1994) The Myth of Asia's Miracle. \emph{Foreign Affairs} $\bm{73}$: 62-78.

Kuznets, S. (1955) Economic Growth and Income Inequality. \emph{The American Economic Review} $\bm{45}$: 1-28.

Lewis, W.A. (1954) Economic Development with Unlimited Supplies of Labour. \emph{The Manchester School} $\bm{22}$: 139-191.

Lucas, R. (1990) Why Doesn't Capital Flow from Rich to Poor Countries? \emph{The American Economic Review} $\bm{80}$: 92-96.

Lucas, R. (2009a) Ideas and Growth. \emph{Economica} $\bm{76}$: 1-19.

Lucas, R. (2009b) Trade and the Diffusion of the Industrial Revolution. \emph{American Economic Journal: Macroeconomics} $\bm{1}$: 1-25.

Lucas, R. Moll, B. (2014) Knowledge Growth and the Allocation of Time. \emph{Journal of Political Economy} $\bm{122}$: 1-51.

Luttmer, E. (2012) Eventually, Noise and Imitation Implies Balanced Growth. Working Paper 699, Federal Reserve Bank of Minneapolis.

Luttmer, E. (2015) An Assignment Model of Knowledge Diffusion and Inequality. Staff Report 509, Federal Reserve Bank of Minneapolis.

Maddison, A. (2009) {\em The Contours of the World Economy 1-2030 AD}. Oxford University Press, Oxford. Data available from http://www.ggdc.net/maddison.

Mankiw, G. (2007) \emph{Principles of Economics, 4th Edition.} Thomson Southwestern, Mason, OH.

Pareto, V. (1896) Cours d'\'Economie Politique. F. Rouge, Lausanne.

Perla, J., Tonetti, C. (2014) Equilibrium Imitation and Growth. \emph{Journal of Political Economy} $\bm{122}$: 52-76.

Reed, W.J. (2001) The Pareto, Zipf and Other Power Laws. \emph{Economics Letters} $\bm{74}$: 15-19.

Reed, W.J. (2003) The Pareto Law of Incomes - an Explanation and an Extension. \emph{Physica A} $\bm{319}$: 469-486.

Russell, J.S. (1845) Report of the fourteenth meeting of the British Association for the Advancement of Science; York. September 1844, 311-390, John Murray, London.

Sala-i-Martin, X. (2006) The World Distribution of Income: Falling Poverty and … Convergence, Period. \emph{Quarterly Journal of Economics} $\bm{121}$: 351-397.

Staley, M. (2011) Growth and the Diffusion of Ideas. \emph{Journal of Mathematical Economics} $\bm{47}$: 470-478.

Toda, A.A. (2011) Income Dynamics with a Stationary Double Pareto Distribution. \emph{Physical Review E} $\bm{83}$ (4): 046122.

Toda, A.A. (2012) The Double Power Law in Income Distribution: Explanations and Evidence. \emph{Journal of Economic Behavior and Organization} $\bm{84}$: 364-381.

Toda, A.A. (2014) Incomplete market dynamics and cross-sectional distributions. \emph{Journal of Economic Theory} $\bm{154}$: 310-348.

Toda, A.A. (2017) A Note on the Size Distribution of Consumption: More Double Pareto than Lognormal. \emph{Macroeconomic Dynamics} $\bm{21}$: 1508-1518.

Toda, A.A. Walsh, K. (2015) The Double Power Law in Consumption and Implications for Testing Euler Equations. \emph{Journal of Political Economy} $\bm{123}$: 1177-1200.

Tsimring, L., Levine, H., Kessler, D. (1996) RNA Virus Evolution via a Fitness-Space Model. \emph{Physical Review Letters} $\bm{76}$: 4440-4443.

Wu, X., Perloff, J. (2004) China's Income Distribution Over Time: Reasons for Rising Inequality. UC Berkeley Working paper.

van Saarloos, W. (1987) Dynamical Velocity Selection: Marginal Stability. \emph{Physical Review Letters} $\bm{58}$: 2571-2574.

Wang, S., Ball, E. (2014) Agricultural Productivity Growth in the United States: 1948-2011. \emph{Amber Waves}, United States Department of Agriculture. February 3.

Waugh, D. (2000) \emph{Manufacturing industries (chapter 19), World development (chapter 22).} Geography, An Integrated Approach (3rd ed.). Nelson Thornes, Oxford.

Young, A. (1995) The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience. \emph{The Quarterly Journal of Economics} $\bm{110}$: 641-680.

Young, A. (2003) Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period. \emph{Journal of Political Economy} $\bm{111}$: 1220-1261.