Flows of people, flows of ideas, and the inequality of nations

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The present paper examines a neglected determinant of aggregate productivity: temporary cross-border flows of people. We hypothesize that interaction between people from different nations facilitates the international diffusion of ideas, thus stimulating aggregate productivity. In order to assess the causal impact of people flows on productivity, we construct an instrument for people flows. By analogy to the trade/growth literature, this instrument is derived from a fitted gravity equation involving geographic determinants of bilateral travel flows. Our cross-section analysis reveal that greater international interaction leads to higher productivity; a very similar result, qualitatively as well as quantitatively, is obtained when we employ dynamic panel data methods for the purpose of identification.
Original languageEnglish
JournalJournal of Economic Growth
Issue number1
Pages (from-to)1-32
Number of pages32
Publication statusPublished - 2011

ID: 32436259