Within The Context Of The Solow Model, List And Explain The Problems With Neo-classical Growth Theory. How Does Endogenous Growth Theory Address These Problems? Is Endogenous Growth Theory Problem-free?

Running head : RUNNING HEAD FOR PUBLICATION GOES HERETitle of Your Goes HereYour address Goes HereInstitutional Affiliation Goes Here Exogenous and Endogenous harvesting feignsNeoclassical produce speculation , or also known as the Solow reaping surmisal or exogenous increase theory , posits that considerable edge , sustained economic growth is plainly assertable by technical make out and innovation which increases the efficiency of troops . Changes in the saving and /or investment rate scarcely induces short destination growth , in which diminishing returns to capital force the economy to return to a steady body politic level However , it does not explains how or why technical procession is determined or created it is assumed that this technological leave is exogenous that is , determined by factors outsid e the consideration of the setCritics of the Solow growth warning say that this is an unrealistic supposition that does not look the underlying economic reality . Their answer to the Solow growth work out of exogenous technological growth is a stumper of endogenous growth , in which technological progress is explained and determined by factors within the scope of the dumbfound . More specifically , jibe to Roberts and Setterfield , endogenous growth theory , in their own oral communication , have 2 major variants , namelyAn endogenous growth theory is single in which the rate of growth is determined by the equilibrium solution of the growth model itself kind of than beingness imposed upon the model from without (exogenously orAn endogenous growth theory is one in which technical progress is explicitly modeled , alternatively than being treated as exogenously given manna from promised pull down 2Attempts to explain the rate of technological progress has creat ed a model of endogenous growth , in which c! onstant returns to crownwork ar the underlying supposition , compared to diminishing returns to capital in the Solow model .

2 This is made possible by the broad assumption that human knowledge and skills are also a establish of capital , and once accumulated they do not take on the properties of diminishing returns since more of it does not crowd out other(a) radical factors of capital , relative to other traditional forms of capital . 3 In addition , new knowledge begets boost knowledge , which might have a virtuous motorcycle takings at best and reduce knowledge derogation at worst . Knowledge can also be viewed as a public good which benefits society as a whole . This makes it a more plausible of eagle-eyed term economic growthOne of the key results of the endogenous growth model is that establishment policy decisions can permanently raise a inelegant s growth rate if they lead to more technological progress and innovation , hence making growth endogenous , as its name suggests . This also emphasize the role of common spend investment in seek and development as the key source of technical progress and innovation , since most inquiry and development is driven by a profit occasion in to capture a short term monopoly or patent , under which more profits can be made . This suggests that the protection of property rights and patents can increase the incentives for neck and neck organizations...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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