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Endogenous Growth when Firms and Consumers Behave Rationally in a Neoclassical Framework


  • Alexandre Rands

    () (Universidade Federal de Pernambuco)


This paper presents a simple Neoclassical Growth Model in which technological change is endogenous and saving behaviour affects long-term equilibrium growth, despite its simple structure and reliance on all standard Neoclassical assumptions. The only relevant difference between this model and the standard models is that firms pursue an inter-temporal optimisation, which assures that their current decisions affect their future productivity. As a consequence, to invest in technology becomes a rational decision of firms. This simple improvement endows the Neoclassical Model to overcome two of its major shortcomings as pointed out in the literature.

Suggested Citation

  • Alexandre Rands, 2006. "Endogenous Growth when Firms and Consumers Behave Rationally in a Neoclassical Framework," Working Papers 59, Datamétrica Consultoria Econômica, revised 2006.
  • Handle: RePEc:dtm:wpaper:59

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    File Function: Revised version, 2006.
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    More about this item


    Endogenous growth; Neoclassical growth; endogenous technological change;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models


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