Sources of Economic Growth

We first show that TFP is not only essential for long-run growth but also important for a developing economy to escape from a potential poverty trap. Then we present a model with 3 stages of growth: first the country concentrates on production of consumption goods; next it requires the country to import both physical capital to produce consumption goods and new technology capital to produce new technology; and finally, the country needs to import new technology capital and invest in the training and education of high skilled labor. Chapter 3 shows that long-run economic growth can be sustained by learning-by-doing, however the growth based purely on learning-by-doing is constrained by labor growth rate. In chapter 4 we study a developing non-renewable natural resource producer. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We show that the extent to which the country will escape from the poverty trap depends on: the interactions between technology and impatience; the characteristics of the resource revenue function, the level of its initial stock of capital, and the abundance of the natural resource.