The wide cross-country disparity in rates of economic growth is the most
puzzling feature of the development process. This paper describes a class of
models in which this type of heterogeneity in growth experiences can arise as a
result of cross-country differences in government policy. These differences in
policy regimes can also create incentives for labor migration from slow growing
to fast growing countries. In the class of models that we study growth is
endogenous but the technology exhibits constant returns to scale and there is a
steady state path that accords with Kaldor's stylized facts of economic
development. The key to making growth endogenous in the absence of increasing
returns is the presence of a "core" of capital goods that can be produced
without the direct or indirect contribution of factors that cannot be
accumulated, such as land.
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