Solowian view on miracle growth rate in NIEs as a result of productivity
growth whereas many others (e.g. Krugman [1997]) convince that broad capital accumulation is only true engine underlying NIEs growth. Krugman’s
view is correct in the short and mid terms, however in the long term, TFP is
the main engine of growth. We show that the optimal strategy for a developing country consists of accumulating physical capital first and there is no
research activity. When the country reaches a certain level of development,
which is endogenously determined in the model, the technological progress
may be generated. Three critical factors: the amount of available human capital; the relative price of technological capital; and the initial income of the
economy.