Management Ability, Long-run Growth, and Poverty Traps

This study establishes an R&D-based growth model that includes the functional difference between labor and human capital in the production of goods. In our analysis, human capital is used by the managers in the manufacturing process. Such an allocation of human capital yields three possible steady states: endogenous growth, poverty traps, and multiple equilibria. Economies are sorted into these steady states according to the endowments of labor, human capital, and knowledge. Thus, the obtained steady states explain some economic growth patterns, such as polarization and leapfrogging of economies.