A Rostovian model of endogenous growth and underdevelopment traps
The paper presents a model which combines self-sustained growth and 'underdevelopment traps' into a common analytical framework. The objective is to given an analytical interpretations to Rostow's observation that there is a 'decisive interval in the history of a society when growth becomes its normal condition' and to the empirical evidence that some countries seem not to have achieved this stage yet. The model exhibits aggregate non-convexities and thresholds which separate a region where growth is 'Solow-type', with convergence to a stationary steady-state from region where growth is 'Romer-type' , with endogenous self-sustained growth. In some critical stages of development multiple equilibrium trajectory may exist, consistent with alternative sets of self-fulfilling beliefs.
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