International trade and industrialization with capital accumulation and skill acquisition

In this paper we develop a small open economy three-sector model of semi-endogenous growth that consists of an agricultural sector, a manufacturing sector and a skill-producing sector, and we analyze the relationship between specialization processes and economic growth. The main results are as follows: (i) for the sustainability of complete specialization in manufacturing, the growth rate of the population at home must exceed that in the ROW; (ii) it is possible that an economy that is scarce in both capital stock and skills industrializes by delaying the time when it switches from autarky to free trade; and (iii) under free trade, an economy that is abundant in capital stock (skills) but scarce in skills (capital stock) is likely to asymptotically specialize in agriculture.