PERMANENT INTERNATIONAL PRODUCTIVITY GROWTH DIFFERENTIALS IN AN INTEGRATED GLOBAL ECONOMY

The paper analyzes the role of differences in household behavior as a source of persistent and even permanent differences between national o r regional productivity growth rates when there are constant static re turns to scale in production, free international capital mobility and costless international diffusion of technology. The non-tradedness of an essential input, such as human capital, in the growth process can a ccount for permanent international productivity growth differentials. Differences in national policies affecting private saving, whether thr ough lump-sum intergenerational redistribution or through the taxation of financial asset income, can influence the long-run growth differen tials. So do the subsidization of private sector inputs and the free p rovision of public sector inputs in the human capital formation proces s.