"Trade and the Diffusion of the Industrial Revolution"
November 15, 2007
[Video of the Presentation]
Robert E. Lucas presents his recent study on global economic growth and cross-country flows of production-related knowledge. He argues in his paper that these flows are the main force for reducing income inequality. Using evidence on successfully industrialized countries, he proposes a model to describe the evolution of real GDPs in the world economy that is intended to apply to all open economies. The five parameters of the model are calibrated using the Sachs-Warner definition of openness and time-series and cross-section data on incomes and other variables from the 19th and 20th centuries. The model predicts convergence of income levels and growth rates and has strong but reasonable implications for transition dynamics. [via Gabriel and Bayesian Heresy]