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Neoclassical vs. Endogenous Growth Analysis: An Overview

  • Bennett T. McCallum

This paper begins with an exposition of neoclassical growth theory, including several analytical results such as the distinction between golden-rule and optimal steady states. Next it emphasizes that the neoclassical approach fails to provide any explanation of steady-state growth in per capita values of output and consumption, and also cannot plausibly explain actual growth differences by reference to transitional episodes. Three types of endogenous growth models, which attempt to provide explanations of ongoing per-capita growth, are presented and discussed. The likelihood of strictly justifying steady-state growth with these models is very small, since it would require highly special parameter values, but the models' predictions may be reasonably accurate nevertheless.

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File URL: http://www.nber.org/papers/w5844.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5844.

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Date of creation: Nov 1996
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Publication status: published as Bennett T. McCallum, 1996. "Neoclassical vs. endogenous growth analysis: an overview," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 41-71.
Handle: RePEc:nbr:nberwo:5844
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