The world consists of various economies with their different growth margins. These economies have been classified based on level of development, growth stages and emergence. These classifications are inspired by GROWTH THEORIES/MODELS. Growth theories are speculations used overtime to classify economies or determine development in an economy. Under Growth theories we have:
Endogenous Theory/ New Growth Theory
Exogenous Theory/Solow Growth Theory
The above theories are used in illuminating the source of long-term economic growth. This article is based on The ENDOGENOUS GROWTH THEORY.
After the dominance of the Neoclassical Growth for 30 yrs., disappointment arose with the theory on both theoretical and empirical grounds. The Neoclassical …show more content…
NEO-CLASSICAL Vs EDOGENOUS GROWTH MODEL
• Neo-classical growth theory highlights how steady state economic growth rate will be achieved by 3 determinants: capital, labour and technology. These driving forces are equally responsible for economic growth.
• Endogenous growth theory outlines that economic growth occurs due to internal processes and investment in capital instead of external factors leading to economic growth.
• Neo-classical growth theory argues that economic growth will not continue if there’s no advancement in technology.
• Endogenous growth argues that with more investment in technology, there will be an increase in growth.
ECONOMIC IMPLICATION OF ENDOGENOUS GROWTH
The economic implications of endogenous growth model have a positive impact on developing economies. The following are the benefits:
• Developing countries tend to gain from trade with developing countries by acquiring new knowledge.
• This theory highlights the role of private firms for investment in research and development to help aid technological progress.
• This theory aids the openness to trade which promotes openings to firms to participate in international capital market to increase investment
Endogenous Theory/ New Growth Theory
Exogenous Theory/Solow Growth Theory
The above theories are used in illuminating the source of long-term economic growth. This article is based on The ENDOGENOUS GROWTH THEORY.
After the dominance of the Neoclassical Growth for 30 yrs., disappointment arose with the theory on both theoretical and empirical grounds. The Neoclassical …show more content…
NEO-CLASSICAL Vs EDOGENOUS GROWTH MODEL
• Neo-classical growth theory highlights how steady state economic growth rate will be achieved by 3 determinants: capital, labour and technology. These driving forces are equally responsible for economic growth.
• Endogenous growth theory outlines that economic growth occurs due to internal processes and investment in capital instead of external factors leading to economic growth.
• Neo-classical growth theory argues that economic growth will not continue if there’s no advancement in technology.
• Endogenous growth argues that with more investment in technology, there will be an increase in growth.
ECONOMIC IMPLICATION OF ENDOGENOUS GROWTH
The economic implications of endogenous growth model have a positive impact on developing economies. The following are the benefits:
• Developing countries tend to gain from trade with developing countries by acquiring new knowledge.
• This theory highlights the role of private firms for investment in research and development to help aid technological progress.
• This theory aids the openness to trade which promotes openings to firms to participate in international capital market to increase investment