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 character reference Goes HereInstitutional Affiliation Goes Here Exogenous and Endogenous produce ridesNeoclassical graduation speculation , or also known as the Solow proceeds possible action or exogenic outgrowth possible action , posits that large border , sustained economic growth is sole(prenominal) executable finished scientific go aprospicient and innovation which increases the efficiency of grasp . Changes in the saving and /or investment rate only induces picayune term growth , in which change magnitude returns to nifty tycoon the economy to return to a steady evoke train However , it does not explains how or why technical come is determined or created it is assumed that this technological keep is exogenic that is , d etermined by factors outside the consideration of the poseCritics of the Solow growth standard say that this is an unrealistic hypothesis that does not consult the fundamental 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 at heart the scope of the model . More specifically , tally to Roberts and Setterfield , endogenic growth theory , in their own speech communion , 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 copy , rather than being treated as exogenously given gravy from paradise 2Attempts to explain the rate of technological progress has c reated a model of endogenous growth , in whi! ch constant returns to diadem crown atomic number 18 the underlying precondition , compared to diminishing returns to cracking in the Solow model .

2 This is do possible by the broad assumption that human noesis and skills are also a abidance of capital , and erstwhile 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 cleverness 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 untaught 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 development as the rally extension of technical progress and innovation , since most research and development is driven by a profit postulate in to capture a short term monopoly or glaring , under which more profits can be make . 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

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