ABSTRACT
One of the central questions that growth theory faces is how to explain the unequal development observed among nations, a prominent feature of capitalism. Developing countries typically exhibit lower labor productivity and higher capital productivity compared to developed nations. Typically, during the process of development, the increase in labor productivity is accompanied by a decrease in capital productivity. Catching up in labor productivity starts from lower levels, while in capital productivity, it begins from higher levels. Developing countries often have higher profit rates, yet many fail in catching up. This chapter introduces a classical-Marxian growth model to shed light on the dynamics of catching up and falling behind, helping to elucidate the disparities in development between nations. It is organized in three sections. The first presents the canonical classical-Marxian model. The second extends the model to explain the processes of catching up and falling behind. Finally, the last section concludes the chapter by discussing potential extensions to the classical-Marxian growth model.
