In a simple two-country model of the world, the economy of the technology leader is described by the following four equations:

\fwhere Y: is output of goods, A: and At\" are the stock of ideas at times t and t+1, E is the productivity of ideas creation, E is labour supply, L1,; is labour used in the production of goods, L,\" is labour used in the production of ideas and l is the proportion of labour dedicated to ideas creation