Why Cannot Poor Countries Utilize Existing Knowledge? Expansion of Firms and Human Capital Accumulation by Training

Current growth literature does not explain the inability of poor countries to utilize existing knowledge. This study presents a stylized development model based on firms' expansion through on-the-job training. Since trained workers can supervise and train more workers, a development process in which output and productivity increase up to a full utilization of existing technology is generated. Unlike schooling based models, which require assumption regarding a smaller local stock of knowledge, this study relies on the size of the industrial sector and the limited supply of training opportunities, therefore highlights barriers to development, even when technology and capital are available