Total Factor Productivity by Imitative Behavior

Economic welfare is the level of prosperity and quality of living standards in an economy, and it can be measured through a variety of factors such as GDP --total factor productivity-- and other indicators which reflect welfare of the population. We study the determinants of total factor productivity (TFP) growth and economic development in a model where technological progress is driven by the imitative behavior of economic agents in their decisions of whether to upgrade their human capital and/or the technology. An imitation function is postulated whereby the social prevalence of a behavior (skill and/or technological upgrading) increases the probability that the sam behavior spreads further in the population. We show that the process of TFP growth and thus of economic growth is self-promoting but poverty traps can arise