Unified Endogenous Growth Model for Mineral Abundant Countries
This paper analyses an extended version of creative destruction model with strategic complimentarity between R&D investment of firms and education investment of households [Aghion, Howitt, 1992; 2005]. The new assumption is that the probability of innovation in the productive sector is determined endogenously because it depends on the level of human capital in the economy. This model provides a framework to explain the coexistence of two long-run equilibria: zero growth equilibrium and sustainable positive growth equilibrium transition as well as the transition from zero growth to high-growth equilibrium. The model provides explanation for a convergence club phenomenon: some developing countries experience the absence of growth during the years, while others are characterized by catching-up process to the income level of developed countries.