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Endogenous Growth: Analytical Review of its Generating Mechanisms

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    Abstract

    This paper consists of an analytical review of the most relevant endogenous growth models. The objective of this literature review is to discuss analytically and understand, in an integrated form, the main mechanisms, identified in the existing literature, that generate endogenous growth. Endogenous or new growth theory has, so far, produced three main types of mechanisms through which endogenous sustained positive economic growth is made possible. One strategy brings a theory of innovations or R&D into the growth model. In this type of model, endogenously determined technological progress is the engine of economic growth. The second mechanism delivers sustained positive growth through the introduction of an endogenously determined accumulation of human capital. In this kind of model, the source of long-run per-capita growth is human capital accumulation. And a third way to obtain endogenous growth is simply to abandon one of the standard assumptions of the neoclassical model, more precisely the assumption of diminishing returns to capital.

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    Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 4/2003.

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    Date of creation: 2003
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    Handle: RePEc:nip:nipewp:4/2003

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    Keywords: non-diminishing returns to capital; endogenous growth; research and development (R&D); human capital accumulation; Inada conditions.;

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    1. Weil, Philippe, 1990. "Nonexpected Utility in Macroeconomics," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 29-42, February.
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    4. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    5. Elhanan Helpman, 1991. "Endogenous Macroeconomic Growth Theory," NBER Working Papers 3869, National Bureau of Economic Research, Inc.
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    15. Arnold, Lutz G., 2000. "Stability of the Market Equilibrium in Romer's Model of Endogenous Technological Change: A Complete Characterization," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 69-84, January.
    16. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
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    18. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    19. Ulrich Witt, 2006. "Evolutionary Economics," Papers on Economics and Evolution 2006-05, Philipps University Marburg, Department of Geography.
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    21. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
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