Contents

Abstract 818

Keywords 818

1. Introduction 819

2. A brief guide to externalities in growth models 819

2.1. Models with knowledge externalities 820

2.2. Models with knowledge externalities and new-good externalities 821

2.3.

2.4. Modelswithnoexternalities 823

3. Cross-country evidence 825

3.1. The world-wide growth slowdown 825

3.2. Beta convergence in the OECD 827

3.3. Low persistence of growth rate differences 829

3.4. Investment rates and growth vs. levels 831

3.5. R&D and TFP 833

4. Models with common growth driven by international knowledge spillovers 835

4.1. R&D investment and relative productivity 836

4.2. Modeling growth in the world technology frontier 839

4.3. Determinants of R&D investment 843

4.4. Calibration 845

4.5. Thebenefitsofengagement 854

4.6. Discussion of main results 856

5. Conclusion 856

Acknowledgements 857

Appendix A 857

Comparative statics 858

References 859

Handbook of Economic Growth, Volume 1A. Edited by Philippe Aghion and Steven N. Durlauf

© 2005 Elsevier B.V. All rights reserved

DOI: 10.1016∕S1574-0684(05)01011-7