Migration, technology diffusion, and growth

Abstract This article proposes a two-country AK model of growth with cross-country knowledge diffusion and endogenous migration to study the relationship between migration, income inequality, and economic growth. In contrast with mainstream AK literature, the article shows that introducing knowledge diffusion from rich to poor countries makes AK models predict conditional convergence, but also that migration tends to cool the catching-up process of poorer economies. When testing the robustness of the policy implications of the AK literature in the presence of migration, we find that subsidizing capital accumulation in frontier countries stimulates migration and worldwide growth, but also that it increases cross-country inequalities in terms of both income and technology. On the contrary, subsidizing capital accumulation in non-frontier countries reduces migration and mitigates inequalities worldwide, but has no effects on the long-run pace of economic growth of the two countries.