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AbstractThis paper establishes the conditions under which indeterminacy can occur in a Neoclassical growth model with international labor mobility. In the model, workers are supposed to move freely across countries without restrictions, and according to a Harris–Todaro mechanism that makes migration flows sensitive to differences among labor markets conditions. The paper shows that indeterminacy requires the marginal returns to immigrant labor to be diminishing, and no need for productivity externalities at a social level. It also shows that immigration quotas can serve it well to eliminate indeterminacy and stabilize final output.

J.e.l. codes: F4, K2, O2, O3 Economia Politica is covered by Social Sciences Citation Index, Social Scisearch, Journal Citation Reports/Social Sciences Edition (Thomson Reuters – ISI Web of Know ledge); Econlit/Journal of Economic Literature (AEA); Elsevier's Abstracting & Indexing database – SCOPUS ISI Journal Citation Reports® Ranking 2009 Economics: 98/245. Impact Factor: 0,914 ; Income per capita differences have increased dramatically over the last fifty years. Many economists seem to recognize knowledge differences as the main factor in this worldwide economic performance divergence. Developing countries suffer significantly from lagging labour productivity and managerial efficiency related in part to the failure to adopt the latest technology or to update their labour force, and such an evidence has recently led to a huge debate about which channel is most effective in stimulating technology transfer and acquisition. In this paper we will review the policy tools that have been effective in reducing the international knowledge-gap between Developed and Developing countries, and the role played by institutional factors in accomplishing such an issue.

A common assumption in the Schumpeterian growth literature is that the innovation size is constant and identical across industries. This is in contrast with the empirical evidence which shows that: (i) the innovation size is far from being identical across industries; a (ii) the size distribution of profit returns from innovation is highly skewed toward the low value side, with a long tail on the high value side. In the present paper, we develop a Schumpeterian growth model that is consistent with this evidence. In particular, we assume that when a firm innovates, the size of its quality improvement is the result of a random draw from a Pareto distribution. This enables us to extend the class of quality-ladder growth models to encompass firm heterogeneity. We study the policy implications of this new set-up numerically and find that it is optimal to heavily subsidize R&D for plausible parameter values. Although it is optimal to tax R&D for some parameter values,this case only occurs when the steady-state rate of economic growth is very low.