## CAPITAL MOBILITY, CONVERGENCE CLUBS AND LONG-RUNG ECONOMIC GROWTH

### Nuffield College, Oxford University

### August 1995

Abstract

Early convergence models assumed immobile capital. A general equilibrium of Ramsey agents with capital mobility either perfect, or inhibited only by adjustment costs or borrowing constraints, allows the possibility of:

- Unequal income steady states;
- Partial convergence or divergence clubs

From a partial equilibrium analysis for a small country, where human capital accumulation cannot be financed by borrowing, Barro, Mankiw and Sala-i-Martin (1995) shows that low human capital countries grow faster. The persistent income inequality demonstrated by these authors generalizes to a steady state general equilibrium. When intertemporal general equilibrium exists, it is shown how convergence results generalize.