Economic growth.

• Position: Conferences

Members and guests of the NBER's Project on Economic Growth met in Cambridge on October 25 and 26. Project Directors Robert J. Barro, Harvard University, and Paul M. Romer, University of California, Berkeley, organized the following program:

Paul R. Krugman, NBER and MIT, "First Nature,

Second Nature, and Metropolitan Location" (NBER

Working Paper No. 3740)

Discussant: Jose A. Scheinkman, University of

Chicago

James E. Rauch, NBER and University of California,

San Diego, "Balanced and Unbalanced Growth"

Discussant: Gene M. Grossman, NBER and Princeton

University

Steven N. Durlauf, NBER and Stanford University,

and Paul A. Johnson, University of Oregon, "Local

versus Global Convergence in National Economies"

Discussant: Robert J. Barro

Casey B. Mulligan, University of Chicago, and Xavier

Sala-i-Martin, NBER and Yale University,

"Transitional Dynamics in Two-Capital-Goods Models of

Endogenous Growth"

Discussant: Rodolfo E. Manuelli, NBER and Stanford

University

Albert Marcet and Ramon Marmion, Universitat

Pompeu Fabra, "Communication, Commitment, and

Growth"

Discussant: Edward C. Prescott, NBER and

University of Minnesota

Daniel Kaufmann, World Bank, "Productivity of

Investment Projects"

Discussant: Angus Deaton, NBER and Princeton

University

Michael Kremer, Harvard University, "The O-Ring

Theory of Economic Growth"

Discussant: Sherwin Rosen, NBER and University of

Chicago

Krugman develops models of spatial equilibrium in which a central "metropolis" emerges to supply manufactured goods to an agricultural "hinterland." The location of the metropolis is not determined fully by the location of resources: as long as it is not too far from the geographical center of the region, the concentration of economic mass at the metropolis makes it the optimal location for manufacturing firms.

Rauch shows why liberalization of foreign trade should lead to a transition from a lower to a higher steady-state growth rate. However, during the course of this transition, growth initially might be even slower than before liberalization. Rauch then offers a reinterpretation of the post-1973 economic performance of Chile. An application to economic integration of previously separate regions or countries suggests that the largest growth effects obtain if one region is allowed to decline and provide a source of cheap labor for the other region.

Durlauf and Johnson argue that cross-country growth is explained better by a model of local rather than global convergence...