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world economy roughly accorded with the idea of three distinct economic systems: a capitalist first world, a socialist second world, and a developing third world which aimed for a middle way between the first two. The third world was characterized not only by its low levels of per capita GDP, but also by a distinctive economic system that assigned the state sector the predominant role in industrialization, although not the monopoly on industrial ownership as in the socialist economies. The years between 1970 and 1995, and especially the last decade, have witnessed the most remarkable institutional harmonization and economic integration among nations in world history. While economic integration was increasing throughout the 1970s and 1980s, the extent of integration has come sharply into focus only since the collapse of communism in 1989. In 1995 one dominant global economic system is emerging. The common set of institutions is exemplified by the new World Trade Organization (WTO), which was established by agreement of

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This paper uses data for eight manufacturing industries in 1970 and 1987 to test for and characterize dynamic production externalities in cities. We find evidence of both MAR externalities, which are associ-ated with past own industry employment concentration, and Jacobs externalities, which are associated with past diversity of local total employment. More specifically, for mature capital goods industries, there is evidence of MAR externalities but none of Jacobs externali-ties. For new high-tech industries, there is evidence of Jacobs and MAR externalities. These findings are consistent with notions of urban specialization and product cycles: new industries prosper in large, diverse metropolitan areas, but with maturity, production de-centralizes to smaller, more specialized cities. For mature industries, there is also a high degree of persistence in individual employment patterns across cities, fostered by both MAR externalities and persis-tence in regional comparative advantage. The literature on endogenous growth models argues that dynamic information externalities are the driving force for technological inno-Support of the National Science Foundation and also the Woods Hole Oceano-graphic Institute (Turner) for this work is gratefully acknowledged. We acknowledge helpful comments of a referee and the editor. We also benefited from comments of participants in seminars at British Columbia, Harvard, Kentucky, and the National

important in re-shaping this article. X. Sala-i-Martin has generously donated insight and time to try and make me understand. He need not, however, agree with all my statements below. All calculations were performed using the econometrics shell tsrf. Nontechnical Summary The convergence hypothesis|that poor economies might \catch up"| has generated a huge empirical literature: this paper critically reviews some of the earlier key ndings, clari es their implications, and relates them to more recent results. Particular attention is devoted to interpreting convergence empirics. The paper argues that relating them to growth theories, as usually done, gives but one interpretation to convergence dynamics; it does not exhaust their importance. Instead, if we relate convergence to the dynamics of income distributions, it broadens the issues on which such empirics can shed light; it connects with policy concerns on persistent or growing inequality, regional core-periphery stagnation, and tendencies for ongoing capital ows across developed and developing countries. The main ndings are: (1) The much-heralded uniform 2 % rate of convergence could arise for reasons unrelated to the dynamics of economic growth. (2) Usual empirical analyses|cross-section (conditional) convergence regressions, time series modelling, panel data analysis|can be misleading for understanding convergence; a model of polarization in economic growth clari es those di culties. (3) The data, more revealingly modelled, show persistence and immobility across countries: some evidence supports Baumol's idea of \convergence clubs"; some evidence shows the poor getting poorer, and the rich richer, with the middle class vanishing. (4) Convergence, unambiguous up to sampling error, is observed across US states. Empirics for Economic Growth and Convergence by

The paper develops a tractable econometric model of optimal migration, focusing on expected income as the main economic influence on migration. The model improves on previous work in two respects: it covers optimal sequences of location decisions (rather than a single once-for-all choice), and it allows for many alternative location choices. The model is estimated using panel data from the NLSY on white males with a high school education. Our main conclusion is that interstate migration decisions are influenced to a substantial extent by income prospects. The results suggest that the link between income and migration decisions is driven both by geographic differences in mean wages and by a tendency to move in search of a better locational match when the income realization in the current location is unfavorable.

Economic development and underdevelopment is one aspect of the uneven spatial distribution of economic activity. This paper reviews existing literature on geography and development, and argues that rigorous theoretical and empirical analysis is needed to increase understanding of the role of geography in development and to better design development policy. The analytical issues are: why does economic activity cluster in centers of activity? How do new centers develop? And what are the consequences of remoteness from existing centers? Empirical evidence comes both from the international context and from studies of internal economic geography and urbanization.

HOUSE PRICES have recently attracted unusual attention because for the first time in decades large areas in the United States have experienced declining nominal house prices. Such house price declines are not un-precedented. Between 1929 and 1933, nominal house prices declined nearly 25 percent, although there was virtually no real decline.1 And more recently, in the early 1980s, the prices of homes in oil-producing regions fell. In Canada, too, cities such as Vancouver have experienced sharp price declines following rapid increases. These episodes have not been widespread enough, however, to dislodge the view that housing is a solid long-term investment. This view is largely based on the experi-ence of the 1970s, when house price inflation outpaced overall price in-creases by almost 30 percent. Declining real houses prices are not so unusual. For the nation as a whole, real house prices have trended down since the fourth quarter of 1979. Just before the October 1987 stock market crash, real prices were 2.3 percent lower than their 1979 levels. By the second quarter of 1991, real prices had declined another 5.6 percent, with substantially greater real declines in the Northeast and some parts of California. In the New York City metropolitan area, for example, real prices have declined 24

This article examines the role of regional clusters in regional entrepreneurship. We focus on the distinct influences of convergence and agglomeration on growth in the number of start-up firms as well as in employment in these new firms in a given region-industry. While reversion to the mean and diminishing returns to entrepreneurship at the region-industry level can result in a convergence effect, the presence of complementary economic activity creates externalities that enhance incentives and reduce barriers for new business creation. Clusters are a particularly important way through which location-based complementarities are realized. The empirical analysis uses a novel panel dataset from the Longitudinal Business Database of the Census Bureau and the US Cluster Mapping Project. Using this dataset, there is significant evidence of the positive impact of clusters on entrepreneurship. After controlling for convergence in start-up activity at the region-industry level, industries located in regions with strong clusters (i.e. a large presence of other related industries) experience higher growth in new business formation and start-up employment. Strong clusters are also associated with the formation of new establish-ments of existing firms, thus influencing the location decision of multi-establishment firms. Finally, strong clusters contribute to start-up firm survival.

ABSTRACT In this paper we examine levels and trends in agricultural output and productivity in 93 developed and developing countries that account for a major portion of the world population and agricultural output. We make use of data drawn from the Food and Agriculture Organization of the United Nations and our study covers the period 1980-2000. Due to the non-availability of reliable input price data, the study uses data envelopment analysis (DEA) to derive Malmquist productivity indexes. The study examines trends in agricultural productivity over the period. Issues of catch-up and convergence, or in some cases possible divergence, in productivity in agriculture are examined within a global framework. The paper also derives the shadow prices and value shares that are implicit in the DEA-based Malmquist productivity indices, and examines the plausibility of their levels and trends over the study period.