TECHNOLOGICAL BREAKTHROUGHS AND DEVELOPMENT TRAPS

This paper attempts to explain why countries which maintain identical economic conditions at different points in time do not necessarily enjoy a similar path of output growth thereafter. The paper develops a simple model where timing is a significant element of economic growth. The analysis indicates that despite the fact that the steady-state equilibrium in a 'leading' country is unique, equilibrium in a country that lags behind may be path dependent. A technological progress in the advanced country presents a choice of technology in the 'following' country that affects its dynamic evolution and may trap the economy in a lower steady-state equilibrium. © 1991.