Economic Growth and the High Wage Economy

3 A behavioral-institutional model of endogenous growth and induced technical change

Introduction

A fundamental tenet of conventional economic theory is that there is only one sustainable wage path to economic development and, in the long run, economies converge in terms of real per capita gross domestic product (GDP) and mean factor prices. Thus there can be no such thing as a high wage path to economic growth and development since convergence occurs through the process of interregional and international trade and factor mobility and is facilitated by the unfettered working of the marketplace.¹ But, the empirical evidence is heavily weighted in favor of the argument that convergence has not taken place internationally over time, with low and ...