An economic growth model showing government spending with reference to Colombia and learning-by-doing

Learning-by-doing and government spending are well-known engines of long-term economic growth. These growth engines’ interaction has not been analysed to the best of our knowledge. This paper aims at filling that perceived gap by combining Matsuyama [1992] and Barro’s [1990] approaches. Industrialisation and growth are assumed to be directly related in the ensuing model. Governments may play a role in industrialisation by adopting an optimum fiscal policy and through improving efficiency. There is also room for industrial policies leading to optimum resource allocation. This possibility might be reduced in an open commercial regime because the power of comparative advantages may lead a country towards deindustrialisation and lower economic growth. The model is the basis of a reflection on the Colombian economy’s slowdown since 1980