Flying or Trapped?
We develop a unified theory with endogenous technology choice in human/knowledge capital accumulation to establish a rich array of equilibrium development paradigms, including poverty trap, middle income trap and flying geese growth. We then generalize the baseline structure and establish conditions for different development paradigms to arise. By calibrating the general model to fit the data from several representative economies with different income and growth patterns, we identify various prolonged flying geese episodes and middle income traps. By performing growth accounting, we find that improving human capital accumulation efficacy and mitigating barriers to human capital accumulation are most rewarding for advancing the economy and avoiding the middle income trap.
We are grateful for comments by Michele Boldrin, Joe Kaboski, Justin Lin, Danny Quah, Mike Sposi, Yong Wang, Yi Wen, and participants at the Fukuoka Conference, the INSE Conference, the Kobe Conference, the Midwest Macro Meetings, and the Society for Economic Dynamics Conference. Financial support from Academia Sinica, Kobe University, Peking University, JSPS Grant-in-Aid for Scientific Research (Nos. 15H05729, 16H03598, 17H02524, 20K01647), and the Weidenbaum Center of Washington University to enable this international collaboration is gratefully acknowledged. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.