A two-final-good, one-primary-factor, small-open endogenous growth model is constructed based on R&D. The model yields two steady states with different growth rates as potential equilibria. Depending on history and the external environment, the economy may fall into the poverty trap in free...

I develop a small open endogenous growth model with domestic and foreign intermediate goods. The Marshallian external economies in the domestic intermediate goods sector work as the engine of sustained growth. The model offers two arguments. First, imposing a trade distortion is growth- and...