Dynamical analysis of the R&D-based growth model with a regime switch

Abstract

Several empirical studies suggest that advanced economies experience a growth regime switch from factor accumulation to knowledge accumulation. To investigate the mechanism of such a regime switch, this study develops a concise and flexible dynamic model based on Romer (1990) by introducing two types of endogenously supplied R&D input capital. The model replicates the growth patterns of developed and underdeveloped nations, clarifies the important role that capital plays in the difference between them, and presents several implications for interest-rate subsidies and official development assistance. Further, it shows that if a country enjoying long-run growth has little initial capital, its initial economic development will be based on capital accumulation. When the capital stock becomes sufficient for supporting R&D, the economy will achieve long-run growth through R&D.

Caught in the Middle? The Economics of Middle‐income Traps

“…See Iwaisako (2002), Azariadis (2006), Azariadis and Stachurski (2005), Kuwahara (2007Kuwahara ( , 2013, Guillaumont (2009), Agénor and Aizenman (2010), Bénassy and Brezis (2013)), Wang and Wang (2013), Agénor (2015), and Ghatak (2015) for recent contributions to, and discussion of, the literature on poverty traps. 8.…”

“…Poverty traps can occur in models with either a single (stagnation) equilibrium or multiple equilibria. See Iwaisako (), Azariadis (), Azariadis and Stachurski (), Kuwahara (, ), Guillaumont (), Agénor and Aizenman (), Bénassy and Brezis ()), Wang and Wang (), Agénor (), and Ghatak () for recent contributions to, and discussion of, the literature on poverty traps.…”

Culture and stages of economic development

“…A number of studies also explore di¤erent stages of development in the R&D-based growth model; see for example, Zilibotti (1995), Peretto (1999), Funke and Strulik (2000), Irmen (2005) and Kuwahara (2007Kuwahara ( , 2013Kuwahara ( , 2019. These studies consider the case in which an economy features human/physical capital accumulation in an early stage of development and then innovation in a later stage.…”