Transcript IBA8010 ARTICLE PRESENTATION

Origin of Endogenous growth, innovation in the theory of Growth
Presented by: Amstrong Ayuk
IBA: 8010
Dr: Louise Kelly
Endogenous



growth model distinguishes itself from neoclassical growth by:
Emphasizing that economic growth is an endogenous outcome of an
economic system not the result of forces that impinge from outside
It tries to uncover the private & public sector choices that cause the rate
of growth of the residual to vary across countries
The focus of the endogenous growth theory is on the behavior of the
economy as a whole
Two
version explains the origins of work on endogenous growthThe convergence controversy
Question
whether per capita income in different countries is converging
Researchers created new data set with information on income per capita for
many countries & long period of time
Conver
Controversy skips lots of detail and smooth over many complications
that made it seems as real controversy at the time
Conver
Controversy captures only part of what endogenous growth is all
about, it did`nt represent a digression from the main story behind endog`s
growth theory, it reinforce a misleading message- data are scare in econ
analysis
The Passing of Perfect Competition
This start from the observation that, the researchers had enough evidence to
reject all available growth models throughout the 1950s, 1960s and 1970s
What
they lack was good aggregate-level models
This
model suggest that progress in economics does not come merely from
the mechanical application of hypothesis test to data sets
If
macroeconomist consider only cross-country regressions deployed in
conver controversy, it will be easy to satisfy the neoclassical model in which
market incentives & goven`t policies have no effect on discovery, diffusion and
technological advances. But if all evidence are considered, economist can go
beyond this model and look at the determinants of long-run economic success
Endogenous innovation in the theory of growth
 Question: Can economic growth be sustained in the long run? If so what
determines the long-run rate of growth; which economies will grow the
fastest? What kinds of policies can governments use to accelerate advanced
standard of living
The neoclassical growth theory by Solow focus on the process of capital
formation
It assumes that all firms act as price takers in an environment of perfect
competition
Landes (1969) and Rosenberg (1972) provides comprehensive survey about
the relationship between technological advances and American economic
growth
The Innovation-based growth model
 States output expands in a steady state despite the fact that population size
is constant and the economy has no physical capital and the economy grows
because intermediate goods are forever being improved thereby raising
productivity in the assembly of final output
With
the assumptions of exogenous technology and full appropriability of
investment, the neoclassical growth model delivers an unequivocal answer that
the govern`t need not do nothing to promote accumulation and growth, it says
provided an individual is far sighted in their savings behavior and take into
account the well being of their offspring and under this conditions the
equilibrium growth path will be socially efficient
Conclusion
 Improvements in Technology are the best chance we have to overcome the
apparent limits to growth. If greater output requires greater tangible inputs,
then it seems more likely that the fixity in the supplies of various of the earth`s
resources eventually will mean and end to rising per capita incomes