Concluding remarks

Will the whole world be rich by the end of the twenty-first century? The implication of the theory reviewed in this essay is that a country will catch up to the leading industrial countries only if it eliminates the constraints relating to the use of technology.

The historical record of catch-up suggests that joining a free trade club is an important way by which a society can eliminate barriers that were erected to protect specialized groups of factor suppliers and corporate interests and reduce the likelihood that such groups will seek similar protection in the future. The expansion of the European Union as well as the recent U.S. free trade agreements with Central American countries, Chile, Singapore, and Australia are encouraging events. These events show that more and more regions are gaining the political will to reduce these constraints. However, many other regions of the world, particularly Africa, the Indian subcontinent, and South America, still lack this will.

Why one country has this will and another does not is an important open question. As a first step toward answering it, it is imperative that economists better understand how it is that constraints to the efficient use of resources come to be imposed on a society in the first place. Some progress is being made in this area. Grossman and Helpman (1994), Holmes and Schmitz (1995, 2001), Krusell and Rios-Rull (1996, 2002), McDermott (1999), Bridgman, Livshits and MacGee (2001), Kocherlakota (2001), Parente and Rios-Rull (2005), Samaniego (2001), Teixeira (2001) and Parente and Zhao (2003) all deal with this issue to some degree.

Acknowledgements

The second author thanks the National Science Foundation and the University of Min­nesota Foundation for research support. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.

References

Bairoch, P. (1993). Economics and World History: Myths and Paradoxes. University of Chicago Press, Chicago.

Becker, G.S. (1960). “An economic analysis of fertility”. In: Easterlin, R. (Ed.), Demographic and Economic Change in Developed Countries, Universities-National Bureau Conference Series, vol. 11. PrincetonUni­versity Press, Princeton, NJ, pp. 209-240.

Becker, G.S., Murphy, K.M., Tamura, R. (1990). “Human capital, fertility, and economic growth”. Journal of Political Economy 98, S12-S37.

Bridgman, B., Livshits, I., MacGee, J. (2001). “For sale: Barriers to riches”. Unpublished Manuscript. Federal Reserve Bank of Minneapolis.

Clark, G. (1998). “Nominal and real male agricultural wages in England, 1250-1850”. Unpublished Manu­script. University of California, Davis.

Djankov, S., La Porta, R., Lopez-de-Silanes, F., Shleifer, A. (2002). “The regulation of entry”. Quarterly Journal of Economics 117, 1-37.

Doepke, M. (2000). “Fertility, income distribution, and growth”. Doctoral Dissertation. University of Chicago. Dowrick, S., Spencer, B.J. (1994). “Union attitudes to labor-saving innovation: When are unions Luddites?”.

Journal of Labor Economics 12, 316-344.

Galor, O., Weil, D.N. (2000). “Population, technology, and growth: From Malthusian stagnation to the demo­graphic transition and beyond”. American Economic Review 90, 806-828.

Gollin, D. (2002). “Getting income shares right”. Journal of Political Economy 110, 458-474.

Grossman, G.M., Helpman, E. (1994). “Protection for sale”. American Economic Review 84, 833-850.

Hall, R.E., Jones, C.I.

Hansen, G.D., Prescott, E.C. (2002). “Malthus to Solow”. American Economic Review 92, 1205-1217.

Hendricks, L. (2002). “How important is human capital for development? Evidence from immigrant earn­ings”. American Economic Review 92, 198-219.

Hendricks, L. (2003). “Taxation and the intergenerational transmission of human capital”. Journal of Eco­nomic Dynamics and Control 27, 1639-1662.

Herrendorf, B., Teixeira, A. (2003). “Monopoly rights can reduce income big time”. Working Paper. Univer­sity of Carlos III.

Heston, A., Summers, R., Aten, B. (2002). Penn World Table, version 6.1. Center for International Compar­isons at the University of Pennsylvania (CICUP).

Hoffman, P.T. (1996). Growth in a Traditional Society: The French Countryside, 1450-1815. Princeton Uni­versity Press, Princeton, NJ.

Holmes, T.J., Schmitz, J.A. Jr. (1995). “Resistance to new technology and trade between areas”. Federal Reserve Bank of Minneapolis Quarterly Review 19, 2-17.

Holmes, T.J., Schmitz, J.A. Jr. (2001). “A gain from trade: From unproductive to productive entrepreneur­ship”. Journal of Monetary Economics 47, 417-446.

Hornstein, A., Prescott, E.C. (1993). “The firm and the plant in general equilibrium theory”. In: Becker, R., Boldrin, M., Jones, R., Thomson, W. (Eds.), General Equilibrium, Growth, and Trade II: The Legacy of Lionel McKenzie. Academic Press, San Diego, CA, pp. 393-410.

Johnson, D.G. (2000). “Population, food, and knowledge”. American Economic Review 90, 1-14.

Klenow, P.J., Rodriguez-Clare, A. (1997). “Economic growth: A review essay”. Journal of Monetary Eco­nomics 40, 597-617.

Kocherlakota, N.R. (2001). “Building blocks for barriers to riches”. Staff Report 288. Federal Reserve Bank of Minneapolis.

Krusell, P., Rios-Rull, J.-V. (1996). “Vested interests in a positive theory of stagnation and growth”.

Krusell, P., Rios-Rull, J.-V. (2002). “Politico-economic transition”. Review of Economic Design 7, 309-329. Kuznets, S. (1966). Modern Economic Growth. Yale University Press, New Haven, CT.

Lucas, R.E. Jr. (2002). Lectures on Economic Growth. Harvard University Press, Cambridge, MA.

Maddison, A. (1991). Dynamic Forces in Capitalist Development: A Long-Run Comparative View. Oxford University Press, Oxford.

Maddison, A. (1995). Monitoring the World Economy: 1820-1992. Organisation for Economic Co-Operation and Development, Paris.

Maddison, A. (2001). The World Economy: A Millennial Perspective. Organisation for Economic Co­operation and Development, Paris.

Malthus, T.R. (1798). First Essays on Population. Macmillan, London. Republished in 1966.

McDermott, J. (1999). “Mercantilism and modern growth”. Journal of Economic Growth 4, 55-80.

McGrattan, E.R., Prescott, E.C. (2000). “Is the stock market overvalued?”. Federal Reserve Bank of Min­neapolis Quarterly Review 24, 20-40.

McGrattan, E.R., Prescott, E.C. (2004). “Taxes, regulations, and the value of U.S. and U.K. corporations”. Staff Report 309. Federal Reserve Bank of Minneapolis.

Mokyr, J. (1990). The Lever of Riches: Technological Creativity and Economic Progress. Oxford University Press, Oxford.

Ngai, L.R. (2004). “Barriers and the transition to modern economic growth”. Journal of Monetary Eco­nomics 51, 1353-1383.

Parente, S.L., Prescott, E.C. (1999). “Monopoly rights: A barrier to riches”. American Economic Review 89, 1216-1233.

Parente, S.L., Prescott, E.C. (2000). Barriers to Riches. MIT Press, Cambridge, MA.

Parente, S.L., Rios-Rull, J.-V (2005). “The success and failure of economic reforms in transition economies”. Journal of Money, Credit and Banking 37, 23-42.

Parente, S.L., Zhao, R. (2003). “Slow development and special interests.” Manuscript. University of Illinois, submitted for publication in International Economic Review.

Prescott, E.C. (2002). “Prosperity and depression”. American Economic Review 92, 1-15.

Ricardo, D. (1817). On the Principals of Political Economy and Taxation. J. Murray, London.

Samaniego, R.M. (2001). “Does employment protection inhibit technology diffusion?”. Unpublished Manu­script. University of Pennsylvania.

Schmitz, J.A. Jr. (2001). “Government production of investment goods and aggregate labor productivity”. Journal of Monetary Economics 47, 163-187.

Solow, R.M. (1970). Growth Theory: An Exposition. Oxford University Press, Oxford.

Summers, R., Heston, A. (1991). “The Penn World Table (mark 5): An expanded set of international compar­isons, 1950-1988”. Quarterly Journal ofEconomics 106, 327-368.

Tamura, R.F. (1988). “Fertility, human capital, andthe ‘Wealth ofNations”’. Doctoral Dissertation. University of Chicago.

Teixeira, A. (2001). “Effects of trade policy on technology adoption and investment”. Unpublished Manu­script.

Young, A. (2000). “The razor’s edge: Distortions and incremental reform in the People’s Republic of China”. Quarterly Journal of Economics 115, 1091-1135.