We present a model of vintage human capital. The economy exhibits exogenous deterministic technological change. Technology requires skills that are specific to the vintage. A stationary competitive equilibrium is defined and shown to exist and be unique, as well as Pareto optimal. The stationary equilibrium is characterized by an endogenous distribution of skilled workers across vintages. The distribution is shown to be single peaked, and under general conditions there is a lag between the time when a technology appears and the peak of its usage, what is known as diffusion. An increase in the rate of exogenous technological charge shirts the distribution of human capital to more recent vintages and increases the relative wage of the unskilled workers in each vintage.

This paper develops a model of vintage human capital in which each technology requires vintage specific skills. We examine the properties of a stationary equilibrium for our economy. The stationary equilibrium is characterized by an endogenous distribution of skilled workers across vintages. The distribution is shown to be single peaked and, under general conditions, there is a lag between the time when a technology appears and the peak of it's usage, a phenomenon known as diffusion. An increase in the rate of exogenous technological change shifts the distribution of human capital to more recent vintages thereby increasing the diffusion rate.

This paper develops a model of vintage human capital in which each technology requires vintage specific skills. We examine the properties of a stationary equilibrium for our economy. The stationary equilibrium is characterized by an endogenous distribution of skilled workers across vintages. The distribution is shown to be single peaked and, under general conditions, there is a lag between the time when a technology appears and the peak of it's usage, a phenomenon known as diffusion. An increase in the rate of exogenous technological change shifts the distribution of human capital to more recent vintages thereby increasing the diffusion rate.

We present a model of vintage human capital. The economy exhibits exogenous deterministic technological change. Technology requires skills that are specific to the vintage. A stationary competitive equilibrium is defined and shown to exist and be unique, as well as Pareto optimal. The stationary equilibrium is characterized by an endogenous distribution of skilled workers across vintages. The distribution is shown to be single peaked and there is diffusion of technology in the sense that there is a lag between the time when a technology appears and the peak of its usage. An increase in the rate of exogenous technological change shifts the distribution of human capital to more recent vintages and increases the relative wage of the unskilled workers in each vintage.

We present a model of vintage human capital. The economy exhibits exogenous deterministic technological change. Technology requires skills that are specific to the vintage. A stationary competitive equilibrium is defined and shown to exist and be unique, as well as Pareto optimal. The stationary equilibrium is characterized by an endogenous distribution of skilled workers across vintages. The distribution is shown to be single peaked and there is diffusion of technology in the sense that there is a lag between the time when a technology appears and the peak of its usage. An increase in the rate of exogenous technological change shifts the distribution of human capital to more recent vintages and increases the relative wage of the unskilled workers in each vintage.

We study the effects of large transportation costs on economic development. We argue that the Midwest and the Northeast of the U.S. is a natural case because starting from 1840 decent data is available showing that the two regions shared key characteristics with today’s developing countries and that transportation costs were large and then came way down. To disentangle the effects of the large reduction in transportation costs from those of other changes that happened during 1840–1860, we build a model that speaks to the distribution of people across regions and across the sectors of production. We find that the large reduction in transportation costs was a quantitatively important force behind the settlement of the Midwest and the regional specialization that concentrated agriculture in the Midwest and industry in the Northeast. Moreover, we find that it led to the convergence of the regional per capita incomes measured in current regional prices and that it increased real GDP per capita. However, the increase in real GDP per capita is considerably smaller than that resulting from the productivity growth in the nontransportation sectors.

In models in which convergence in income levels across closed countries is driven by faster accumulation of a productive factor in the poorer countries, opening these countries to trade can stop convergence and even cause divergence. We make this point using a dynamic Heckscher-Ohlin model — a combination of a static two-good, two-factor Heckscher-Ohlin trade model and a two-sector growth model — with infinitely lived consumers where international borrowing and lending are not permitted. We obtain two main results: First, countries that differ only in their initial endowments of capital per worker may converge or diverge in income levels over time, depending on the elasticity of substitution between traded goods. Divergence can occur for parameter values that would imply convergence in a world of closed economies and vice versa. Second, factor price equalization in a given period does not imply factor price equalization in future periods.

Technology change is modeled as the result of decisions of individuals and groups of individuals to adopt more advanced technologies. The structure is calibrated to the U.S. and postwar Japan growth experiences. Using this calibrated structure we explore how large the disparity in the effective tax rates on the returns to adopting technologies must be to account for the huge observed disparity in per capita income across countries. We find that this disparity is not implausibly large.

A sudden stop of capital flows into a developing country tends to be followed by a rapid switch from trade deficits to surpluses, a depreciation of the real exchange rate, and decreases in output and total factor productivity. Substantial reallocation takes place from the nontraded sector to the traded sector. We construct a multisector growth model, calibrate it to the Mexican economy, and use it to analyze Mexico's 1994–95 crisis. When subjected to a sudden stop, the model accounts for the trade balance reversal and the real exchange rate depreciation, but it cannot account for the decreases in GDP and TFP. Extending the model to include labor frictions and variable capital utilization, we still find that it cannot quantitatively account for the dynamics of output and productivity without losing the ability to account for the movements of other variables.

This paper presents a model in which a country's average propensity to save tends to rise endogenously over time. The paper uses a two-sector neoclassical framework to model the transition from agriculture to manufacturing which typically accompanies economic development. Key assumptions are that only the agricultural sector uses land and a simple version of Engel's law. When a country's income per capita is low, agricultural consumption is important; consequently, land is valuable and capital gains on it may account for most wealth accumulation, making the NIPA APS appear low. If exogenous technological progress raises incomes over time, Engel's law shifts demand to manufactured goods. Then land's importance in portfolios relative to reproducible capital diminishes and the measured average propensity to save can rise.