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Neoclassical vs. Endogenous Growth Analysis: An Overview

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  • Bennett T. McCallum

Abstract

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.

Suggested Citation

  • Bennett T. McCallum, 1996. "Neoclassical vs. Endogenous Growth Analysis: An Overview," NBER Working Papers 5844, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5844
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    1. Karl Aiginger & Michael Landesmann, 2002. "Competitive Economic Performance: The European View," WIFO Working Papers 179, WIFO.
    2. Boucekkine, Raouf & Licandro, Omar & Puch, Luis A. & del Rio, Fernando, 2005. "Vintage capital and the dynamics of the AK model," Journal of Economic Theory, Elsevier, vol. 120(1), pages 39-72, January.
    3. Kwack, Sung Yeung & Lee, Young Sun, 2006. "Analyzing the Korea's growth experience: The application of R&D and human capital based growth models with demography," Journal of Asian Economics, Elsevier, vol. 17(5), pages 818-831, November.
    4. Carl Chiarella & Peter Flaschel, 1999. "Disequilibrium Growth Theory: Foundations, Synthesis, Perspectives," Working Paper Series 85, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    5. Brodzicki Tomasz, 2003. "In search for accumulative effects of European economic integration," International Trade 0310006, EconWPA.
    6. Amavilah, Voxi Heinrich, 2006. "Intensity of technology use and per capita real GDP across some African countries," MPRA Paper 1675, University Library of Munich, Germany.
    7. KONYA, Laszlo & GUISAN, Maria-Carmen, 2008. "What Does The Human Development Index Tell Us About Convergence?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 19-40.
    8. EL-MEFLEH, Muhannad A. & SHOTAR, Manhal M., 2008. "A Contribution To The Analysis Of The Economic Growth Of Qatar," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 147-154.
    9. Dave Liu, 2007. "Growth Theory and Application: The Case of South Africa," Working Papers 200714, University of Pretoria, Department of Economics.
    10. Amavilah, Voxi Heinrich, 2014. "Knowledge = Technology + Human Capital and the Lucas and Romer Production Functions," MPRA Paper 58847, University Library of Munich, Germany.
    11. Lawrence Bouton & Mariusz A. Sumlinski, 2000. "Trends in Private Investment in Developing Countries : Statistics for 1970-1998," World Bank Publications, The World Bank, number 13986, April.
    12. Alexander L. Wolman, 2001. "A primer on optimal monetary policy with staggered price-setting," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 27-52.
    13. Musa Jega Ibrahim, 2006. "An evaluation of the developmental implications of the World Bank and IMF lending policies," Working Papers id:535, eSocialSciences.
    14. Amavilah, Voxi Heinrich, 2014. "Human Knowledge and a Commonsensical Measure of Human Capital: A Proposal," MPRA Paper 57670, University Library of Munich, Germany.
    15. Tahir Abdi, 2008. "Machinery & equipment investment and growth: evidence from the Canadian manufacturing sector," Applied Economics, Taylor & Francis Journals, vol. 40(4), pages 465-478.

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