Introduction

Abstract

Until still few years ago, economic growth theory (going back to Solow, 1956; for an introduction cf. Burmeister and Dobell, 1970) predicted convergence of both growth rates and level of per capita income of economies which share identical preferences, technologies and same population growth rates, independently of initial conditions. Countries with a low capital stock grow faster than those with a higher capital stock, until, in the long-run, they all converge to a common constant growth rate. This prediction is due to the way how growth is “explained” in models of this kind. Growth of output per capita resulted, in the simplest model, from an exogenous growth of labour productivity (see e.g. Sala-i-Martin, 1990; Grossman and Helpman, 1991a, ch. 2). Since this increase of productivity is exogenously given, the model itself does not give any explanation of its source. The prediction of convergence of growth rates, itself, is very doubtful and observations show, that on an international level either convergence is not given at all, or that it takes a very long time.