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 extension service Goes HereInstitutional Affiliation Goes Here Exogenous and Endogenous produce ridesNeoclassical moon curser speculation , or also known as the Solow product speculation or exogenous outgrowth opening , posits that ample barrier , sustained economic growth is sole(prenominal) executable through scientific go aprospicient and innovation which increases the efficiency of grasp . Changes in the saving and /or investing rate only induces brusk term growth , in which lessen returns to nifty labor the economy to return to a steady evoke take aim However , it does not explains how or why technical continue is determined or created it is assumed that this technological turn over is exogenous that is , determined by factors outside the consideration of the poseCritics of the Solow growth model say that this is an unrealistic hypothesis that does not consult the primal economic reality . Their answer to the Solow growth dumbfound of exogenous technological growth is a model of endogenous growth , in which technological progress is explained and determined by factors within the scope of the model . More specifically , tally to Roberts and Setterfield , endogenic growth theory , in their own speech dialogue , have 2 major variants , namelyAn endogenous growth theory is sensation in which the rate of growth is determined by the equilibrium solution of the growth model itself quite a than macrocosm imposed upon the model from without (exogenously orAn endogenous growth theory is one in which technical progress is explicitly modeled , rather than being treated as exogenously given manna from heaven from paradise 2Attempts to explain the rate of technological progress has created a model of endogenous growth , in which const! ant returns to cover crown atomic number 18 the underlying supposition , compared to diminishing returns to smashing in the Solow model .

2 This is make possible by the broad assumption that human companionship and skills are also a abidance of capital , and at once accumulated they do not give away the properties of diminishing returns since more of it does not crowd out another(prenominal) primary factors of capital , relative to other traditional forms of capital . 3 In addition , new knowledge begets push knowledge , which energy have a virtuous bout effect at best and reduce knowledge wear and tear at wors t . Knowledge can also be viewed as a public good which benefits society as a whole . This makes it a more plausible of long term economic growthOne of the key results of the endogenous growth model is that government policy decisions can permanently raise a solid ground 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 cloistered investment in look for and nurture as the rally witnesser of technical progress and innovation , since most research and development is driven by a profit destiny in to capture a short term monopoly or palpable , under which more profits can be do . This suggests that the protection of property rights and patents can increase the incentives for mystical organizations...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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