Labour Mobility and Endogenous Growth

Growth models of learning-by-doing assume that the knowledge learned in pro-duction gets freely and instantly spread to the whole economy. However, the as-sumption of instant di¤usion of knowledge is unrealistic. Di¤usion of knowledge takes time and requires some channel of transmission. In this paper we relax this assumption. We present a model where the free and instant di¤usion of knowl-edge may exist only within sectors, but not across sectors. In contrast, di¤usion of knowledge across sectors can only occur through the mobility of labor. We in-vestigate the equilibrium outcome of such economy considering two scenarios: full learning-by-doing and partial learning-by-doing. In the \u85rst scenario, the produc-tion function is an AK function and, obviously, the equilibrium does not exhibit transition. In this case, the equilibrium path coincides with a BGP along which Gross Domestic Product grows at a constant growth rate. In contrast, when there is partial learning, in an equilibrium path, the production function exhibits de-creasing returns to capital. As a consequence, the equilibrium exhibits transition. Moreover, when there are complementarities among the di¤erent types of workers, the equilibrium converges to a steady state. However, if there is perfect substitu-tion, the equilibrium may converge to a BGP with full labor mobility. In this case, labor mobility allows to escape from a poverty trap. JEL classi\u85cation codes: O41