SELF-FULFILLING EXPECTATIONS AND ECONOMIC-GROWTH - A MODEL OF TECHNOLOGY ADOPTION AND INDUSTRIALIZATION

In this work we construct a model that integrates both industrializati on and endogenous growth. We feature the role of technology adoption i n sustaining growth and achieving industrialization. Our economy conta ins multiple equilibria for an initial history. We found that only sel f-fulfilling expectations matter in selecting an equilibrium, whereas history plays no role. Our equilibrium is shown to involve a threshold property: when the economy starts above this threshold, the economy i s able to sustain growth; otherwise, it is not. Both the rate of econo mic growth and the process of industrialization increase gradually and approach an upper bound.