Broadly speaking, I am interested in International Development and Growth. For me these topics are inextricably linked to the effects of global trade and financial capital flows, and to the impacts exerted by education and technical change.

The subject of my most important work is the relationship between education, technical change and economic growth. These topics are explored further in my papers on Development and International Trade & Capital Flows and in my purely theoretical work on Growth Theory.

I would classify my interests into the three general areas briefly described below:

The Effects of Education & Technological Change on Economic Growth
It seems impossible to attempt to explain why per capita income in the US is about six times higher in the 1990s as compared to the 1890s without acknowledging the importance of technical change. It is easy to contemplate changes in technology; they are around us and we are constantly aware of them. But, how did such rapid change come about and how important was the role of education in promoting new technologies?

In Interaction Between Endogenous Human Capital and Technological Change (RES 1996) I examine how technological change and skills interact to generate those fluctuations in incomes that have been observed in developed economies. I extend the same analysis to developing economies in Training, Adverse Selection and Appropriate Technology... (JEDC 1999) because countries that are catching up to the technological frontier certainly face different challenges than those that set technical standards. Both papers illustrate the importance of the educational investment decision in education, which is further explored in my work with Cecilia García-Peñalosa Inequality and Growth: The Dual Role of Human Capital in Development (JDE 2001). In this paper we examine how fundamentally different research and development sectors in advanced and developing countries influence the supply of skilled labor. The paper attempts to makes sense of the diverse data on economic growth and inequality.

Finally, Education, Technological Change and Economic Growth (IARED 1994), coauthored with Thomas Bailey, provides a non-technical summary of all these issues.

Development and International Trade & Financial Capital Flows
The hallmark of the 20th century is increased integration of the world's goods and capital markets. As the costs of migration, transportation and transactions decline, this integration is likely to continue – but (how) do developing nations benefit from these developments? In Trade, Development and Converging Growth Rates (JIE 1999) we establish the conditions under which increased globalization can benefit developing economies without having to rely on unquantifiable knowledge or technology spillovers. Similarly, in my work with Pantelis Kalaitzidakis, we show that what matters most is the Human Capital Dimension to Direct Foreign Investment (U. Michigan Press, 1997): without education, technologies cannot be attracted or generated in the developing world – hence it is skills that are the ultimate engine of growth. In The North American Free Trade Agreement and the U.S. Apparel Industry (Washington DC 1992), Thomas Bailey and I provide a case study of the intellectual, technical and physical infrastructure that explains the location/migration of apparel manufacturing plants in the US and Mexico over time.

Ever since my work on the Indonesian capital (banking and stock) market destortions for the International Monetary Fund (IMF 1992), I have also been interested in how domestic policies interact with first world capital and goods market integration. In joint work with Stephen Turnovsky we explore the significance of International Capital Markets… (RIE 1999) in fostering domestic (in)stability as developing countries open up to the outside world, or attempt financial liberalizations. The implications of our mode are tested empirically in Optimal Policies for Financial Liberalizations (GER 2000), with Uwe Walz as the additional coauthor.

Pure Growth Theory
What are the determinants of long-term economic growth – the driving force behind changes in living standards? My purely theoretical work has focused on the properties of models that comprise the New Growth Theory; specifically, I examine the properties of models that adhere better to real-world evidence than the first-generation endogenous growth models (I review a large body of the empirical evidence in Productivity (RIE 1998)).

Initially Stephen Turnovsky and I developed A Generalized Model of Economic Growth (EJ 1999) to study the specific ingredients that are required to build a model which replicates the long-run economic growth experience of the US and other advanced countries since the late 1880s.

Our next step was to construct a model that indicates how this economy reaches new equilibria in response to changes in (a) public policy, (b) underlying preference parameters of agents, or (c) production technologies. The result of these analyses are discussed in the Convergence in a Two Sector Non-Scale Growth Model (JEG 1999), and even more extensively in Transition Dynamics in Non-Scale Models (JEDC 2001).

Focusing specifically on public policy and on the provision of public goods (such as roads or education), we show in Scale, Congestion and Growth (Economica 2000) that governments can influence the welfare and growth through appropriate taxation and provision of public goods that differ in their productive characteristics.

One of the fundamental and persistent puzzles of the New Growth theory is how monopoly power affects the rate of growth.  Much emphasis has focused on modeling technological change as the result of profit-maximizing agent’s investment decisions. However, few inroads have been made to show how institutional constraints (such as patent protection and monopoly power) affect the incentives to innovation.  In Market Structure and Innovation Revisited (1999), Sang Choon Kim and I show why only highly innovative firms & sectors prefer increased competition, while laggards and low innovators prefer stronger protection from (their) profit destruction.

How exactly new ideas are created is a mystery, especially to economists.  In Search in Research: An Evolutionary Approach to Technical Change and Growth (2000), I collaborate with Klaas van't Veld to show how innovations can be understood much like genetic evolution: a continuous experimentation of trial and error based on the principle of the Selection of the Fittest.  Evolutionary models possess highly efficient search algorithms, which we use to explore rates of innovation and growth.

More up-to-date lists of my current publications can be obtained from my Research Page.