International factor mobility and long-runeconomic growth

Long-run economic growth is analysed in a global model with many small countriesprone to national level total factor productivity shocks. The possibility ofprecautionary saving or dissaving is a function of the higher-order moments and thecross-moments of the factor income distributions, which in turn depend on the globalregime governing factor mobility. International capital mobility generatesprecautionary saving by eliminating interest uncertainty and by increasing earningsuncertainty, while international labour mobility reduces saving by achieving theopposite. If firms operate under a learning-by-doing investment externality, theseeffects then translate into long-run growth outcomes...