The Mechanics of Economic Growth Through Capital Accumulation and Technological Progress

Abstract

This study develops a model wherein capital is used in final goods production and research and development (R&D) activities. This arrangement generates changes of the equilibrium capital allocation corresponding to capital endowment, which engenders a regime change from capital based growth with decreasing returns to R&D based perpetual growth. These two growth phases account for the polarization of economies. The model also engenders multiple equilibria on capital allocation-which emerge during the middle stages of capital accumulation-accounting for leapfrogging and the instability of the economic growth of developing countries with medium capital accumulation. JEL Classification Numbers: E22, O11, O14, O31, O41.

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.…”

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

“…The present study shares its purpose and structure with those of Zilibotti (1995), Matsuyama (1999Matsuyama ( , 2001), Irmen (2005) and Kuwahara (2007), who focus on the regime switch from capital-based growth to R&D-based growth. While Zilibotti (1995) and Irmen (2005) conduct an analysis by using the model of a competitive economy, Matsuyama (1999Matsuyama ( , 2001), Kuwahara (2007), and the present study use models with monopoly power, which stems from the intellectual proprietary right created by R&D activities. While Matsuyama (1999) and Kuwahara (2007) assume instantaneous monopoly power in the R&D sector and focus on the multiplicities of the economic path, 2 the present study focuses on long-run growth with the regime change as a one-off, epoch-making event in economic development.…”

“…While Zilibotti (1995) and Irmen (2005) conduct an analysis by using the model of a competitive economy, Matsuyama (1999Matsuyama ( , 2001), Kuwahara (2007), and the present study use models with monopoly power, which stems from the intellectual proprietary right created by R&D activities. While Matsuyama (1999) and Kuwahara (2007) assume instantaneous monopoly power in the R&D sector and focus on the multiplicities of the economic path, 2 the present study focuses on long-run growth with the regime change as a one-off, epoch-making event in economic development. In our study, the obtained growth path is a unique saddle-stable one, and no multiple equilibrium is obtained.…”

“…1 Regime change and the realization of long-run growth have attracted attention in this decade because of their connection with the endogenous growth theory. Some theoretical works produce models for describing the regime change from capital-based growth with decreasing returns to long-run positive growth (Zilibotti 1995 Kuwahara 2007). The present study shares its purpose and structure with those of Zilibotti (1995), Matsuyama (1999Matsuyama ( , 2001), Irmen (2005) and Kuwahara (2007), who focus on the regime switch from capital-based growth to R&D-based growth.…”

“…Some theoretical works produce models for describing the regime change from capital-based growth with decreasing returns to long-run positive growth (Zilibotti 1995 Kuwahara 2007). The present study shares its purpose and structure with those of Zilibotti (1995), Matsuyama (1999Matsuyama ( , 2001), Irmen (2005) and Kuwahara (2007), who focus on the regime switch from capital-based growth to R&D-based growth. While Zilibotti (1995) and Irmen (2005) conduct an analysis by using the model of a competitive economy, Matsuyama (1999Matsuyama ( , 2001), Kuwahara (2007), and the present study use models with monopoly power, which stems from the intellectual proprietary right created by R&D activities.…”