Catching up, overtaking and the growth implications of economies with land

Mountford, A. (1997) Catching up, overtaking and the growth implications of economies with land (Discussion Papers in Economics and Econometrics, 9711) Southampton, UK. University of Southampton

Abstract

This paper analyzes the global dynamics of a convex overlapping generations model with land and analyzes the implications of international capital mobility in this model. It shows that this model can explain some of the stylised facts of the growth literature which cannot be explained by the standard two factor models and also provides interesting insights into the economics of land taxation. Specifically, it is shown how international capital mobility can allow one economy to catch up and overtaken the steady state GDP and GNP per capita of another economy, how a small (marginal) increase in the rate of land taxation may cause a large (non-marginal) increase in the steady state level of income and how there could be a gradual convergence of per capita GDP across countries in a world with perfect international trade and capital mobility.

Finally it is also shown how this model can be extended as an endogenous growth model and can thus translate the results about steady state income levels into results about steady state growth rates.

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