Lucas on Economic Development

Abstract

In his work on economic development, Lucas’s goals were to understand the enormous diversity across countries in levels and growth rates of per capita income and to build a framework for studying developing economies with the same kind of precision and rigor that the neoclassical growth model had brought to the study of already industrialized countries. Lucas found knowledge spillovers to be a key mechanism. Thus, human capital, which he viewed broadly, is at the center of much of his work, and external effects are crucial. Lucas stated explicitly that in his view, physical capital plays a distinctly secondary role.