Path-dependent economic growth with technological trajectory

Tsutomu Harada

Economics of Innovation and New Technology, 2010, vol. 19, issue 6, 521-538

Abstract: This paper develops an integrated model of neoclassical and endogenous growth, which accounts for both income inequalities across countries and the convergence hypothesis, while all the growth stylized facts are satisfied. The model in this paper assumes that an economy industrializes in two stages. In the first stage, the economy starts industrialization through factor accumulation (the Solow stage); and after sufficient factor accumulation, it switches to the second stage of endogenous growth through innovation (the AK stage). Therefore, it becomes crucial to determine when switching from the Solow to the AK stages is implemented. We model this switching problem as a two-stage optimal control and show that the growth rate declines during the Solow stage, while in the AK stage it becomes constant. In addition, we draw several policy implications.

Keywords: path dependency; convergence hypothesis; Solow stage; AK stage; two-stage optimal control (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/10438590903166412

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