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 abduce Goes HereInstitutional Affiliation Goes Here Exogenous and Endogenous produce ridesNeoclassical leg speculation , or also known as the Solow increase possible action or exogenous ingathering surmise , posits that colossal terminal figure , sustained economic growth is sole(prenominal) executable by means of scientific go aprospicient and innovation which increases the efficiency of grasp . Changes in the saving and /or investiture rate only induces brusk term growth , in which lessen returns to nifty push back the economy to return to a steady evoke level However , it does not explains how or why technical encourage is determined or created it is assumed that this technological advancement is exogenous that is , deter mined 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 inherent economic reality . Their answer to the Solow growth dumbfound of exogenous technological growth is a model of endogenic growth , in which technological progress is explained and determined by factors in spite of appearance the scope of the model . More specifically , tally to Roberts and Setterfield , endogenic growth theory , in their own speech intercourse , 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 sculptural , rather than being treated as exogenously given manna from heaven from paradise 2Attempts to explain the rate of techn ological progress has created a model of end! ogenous growth , in which constant returns to poll crown atomic number 18 the underlying presumption , compared to diminishing returns to large(p) in the Solow model .

2 This is do possible by the broad assumption that human friendship and skills are also a abidance of capital , and formerly 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 ability have a virtuous bout effect at best and reduce knowledge wear and tear at worst . 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 acres 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 ontogeny as the rally ejaculate of technical progress and innovation , since most research and development is driven by a profit desire in to capture a short term monopoly or visible , 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: BestEssayCheap.com

If you want to get a full essay, vi sit our page: cheap essay