Endogenous Verses Exogenous Growth Theories
In neoclassical growth models, the sources of growth, is exogenous usually “technology”. Such theoretical models hence are able to describe how an economy grows, but not why it grows. To overcome this shortcoming, several growth models have been developed that make growth an endogenous variable. In contrast to neoclassical growth theory, endogenous growth theory argues that policy measures (such as subsidies on R&D and education) can have an increase long-run growth rate of an economy.
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� Developing a brief summary of endogenous and exogenous growth theories.
� Analyzing the impact of government policy on the long-term growth rate of an economy.
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