INCREASING RETURNS, MIGRATIONS AND CONVERGENCE

The paper investigates the link between convergence and factor mobilit y. It contrasts the predictions of exogenous growth models (where fact or mobility is found to promote convergence) with endogenous growth mo dels (where factor mobility invariably leads to a cumulative process o f regional divergence). The paper develops a simple model of regional growth with mobile factors, increasing returns to scale and diminishin g returns to the reproducible factor. It also tries to provide more so lid microfoundations to the specification of the migration choice. Bec ause of diminishing returns to the reproducible factor, the economy wi ll not be able to generate endogenous self-sustaining growth. Neverthe less, the results suggest that, even in the context of an exogenous gr owth model, convergence is not warranted. However, convergence may occ ur, for some particular constellations, despite the presence of increa sing returns to scale. More precisely, it is shown that convergence is more likely the greater is the scope for scale economies and (somewha t paradoxically) the lower is the degree of labor mobility