ENDOGENOUS GROWTH MODEL
INTRODUCTION
In economics the pending question as always been “How do we boast GDP and GDP growth rate”, “How can we grow faster” it is discovered that in solow growth model GDP and GDP growth rate are determined by savings rate, population growth rate, and rate of technological progress. Economies that are advanced in technology, the advancement of knowledge is a very key determinant of growth, however, economies that are less developed, theoretical and empirical postulations observe that they focus less on advancing knowledge and invention of new technology.
Economies that are more advanced in technology have knowledge as their key determinant of growth, however, in less developed economies, theoretical and empirical …show more content…
The endogenous growth theorist believe that in order to improve productivity, direct measures must be taken to increase the pace of innovation plus investment in human capital. This theory does not criticize the neo classical growth theory but it extends more on it by introducing the endogenous technical progress in the growth theory. The major participant in this theory are Paul Romer, Arrow and Robert Lucas including other …show more content…
• Technological change is endogenous
•
CRITICISM OF ENDOGENOUS GROWTH THEORY
• According to Scott and Auerbach, the main ideas of the new growth theory can be traced to A2dam Smith and increasing returns to Marx’s analysis.
• Srinivasan does not find anything new in the new growth theory because increasing returns and endogeneity of variables have been taken from the neoclassical and Kaldor’s models.
• Fisher criticizes the new growth theory because it depends only on the production function and the steady state.
• To Olson, the new growth theory puts too much emphasis on the role of human capital and neglects the role of institutions.
• In the various models of new growth theory, the difference between physical capital and human capital is not clear. According to Romer’s model, capital goods are key to economic growth. He assumes that human capital accumulates and when it is embodied in physical capital then it becomes a driving force. But he does not clarify which is the driving force.
THE DIFFERENCE BETWEEN NEOCLASSICAL GROWTH THEORY AND ENDOGENOUS GROWTH
INTRODUCTION
In economics the pending question as always been “How do we boast GDP and GDP growth rate”, “How can we grow faster” it is discovered that in solow growth model GDP and GDP growth rate are determined by savings rate, population growth rate, and rate of technological progress. Economies that are advanced in technology, the advancement of knowledge is a very key determinant of growth, however, economies that are less developed, theoretical and empirical postulations observe that they focus less on advancing knowledge and invention of new technology.
Economies that are more advanced in technology have knowledge as their key determinant of growth, however, in less developed economies, theoretical and empirical …show more content…
The endogenous growth theorist believe that in order to improve productivity, direct measures must be taken to increase the pace of innovation plus investment in human capital. This theory does not criticize the neo classical growth theory but it extends more on it by introducing the endogenous technical progress in the growth theory. The major participant in this theory are Paul Romer, Arrow and Robert Lucas including other …show more content…
• Technological change is endogenous
•
CRITICISM OF ENDOGENOUS GROWTH THEORY
• According to Scott and Auerbach, the main ideas of the new growth theory can be traced to A2dam Smith and increasing returns to Marx’s analysis.
• Srinivasan does not find anything new in the new growth theory because increasing returns and endogeneity of variables have been taken from the neoclassical and Kaldor’s models.
• Fisher criticizes the new growth theory because it depends only on the production function and the steady state.
• To Olson, the new growth theory puts too much emphasis on the role of human capital and neglects the role of institutions.
• In the various models of new growth theory, the difference between physical capital and human capital is not clear. According to Romer’s model, capital goods are key to economic growth. He assumes that human capital accumulates and when it is embodied in physical capital then it becomes a driving force. But he does not clarify which is the driving force.
THE DIFFERENCE BETWEEN NEOCLASSICAL GROWTH THEORY AND ENDOGENOUS GROWTH