The mechanics of economic growth through capital accumulation and technological progress

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.