Education Seminar Presentations Knowledge Spillovers and the World Income Distribution *

This paper studies the implications for the long-run world income distribution (WID) of two possible knowledge spillovers structures: appropriate technology and backward knowledge spillovers. In an appropriate technology framework, where total factor intensity is an index of the technological level of an economy, countries will grab useful knowledge only from their technological neighborhood, the subset of countries which are "technologically near". In general, an equilibrium WID clusters the world economy in distinct technological neighbourhoods, providing a mechanism for the endogenous emergence of convergence clubs. If spillovers are backward directed, either because free knowledge flows can only improve existing technologies or because of barriers to technology adoption, we show that an increase of the strength of spillovers raises inequality, while growth and inequality are negatively related. We find that both spillovers structures can explain over a half of observed cross-country productivity differences, but the backward spillovers one is more consistent with the observed world income distribution. JEL Classifications: O40, O33, D31