Talk:Endogenous growth theory

Critics
The article is close to useless, because there is no clear definition of y and k, nor of the functions. I have tried to fix it.

This should be elaborated upon. Most endogenous growth theories DO predict non-convergence although I guess some folks may feel that they don't do this in a satisfactory way. The article also states something along the lines of "it is generally felt" which is wishy washy and needs some citations.radek 05:12, 24 January 2007 (UTC)

Article needs to be corrected. In Solow's model ('old growth theory') the proportion of savings will have no effect on the warranted (long-term) growth rate. According to Solw, technological change, given exogenously, is the only factor that can increase the warranted rate.

Fair use rationale for Image:Pyat rublei 1997.jpg
Image:Pyat rublei 1997.jpg is being used on this article. I notice the image page specifies that the image is being used under fair use but there is no explanation or rationale as to why its use in this Wikipedia article constitutes fair use. In addition to the boilerplate fair use template, you must also write out on the image description page a specific explanation or rationale for why using this image in each article is consistent with fair use.

Please go to the image description page and edit it to include a fair use rationale. Using one of the templates at Fair use rationale guideline is an easy way to insure that your image is in compliance with Wikipedia policy, but remember that you must complete the template. Do not simply insert a blank template on an image page.

If there is other fair use media, consider checking that you have specified the fair use rationale on the other images used on this page. Note that any fair use images uploaded after 4 May, 2006, and lacking such an explanation will be deleted one week after they have been uploaded, as described on criteria for speedy deletion. If you have any questions please ask them at the Media copyright questions page. Thank you.

BetacommandBot 11:26, 6 July 2007 (UTC)

Rewrite
This article needs to rewritten. It reads like it was created by an under-graduate with only minimal knowledge of the subject. If anyone wants to help out contact me on my talk page or here. MartinDK 17:04, 14 July 2007 (UTC)

i agree. furthermore the link on peter howitt at the bottom of the page, surely, is wrong. —The preceding unsigned comment was added by Smt2007 (talk • contribs).

I also agree that this page needs to be re-written - but could you please make the explanation a little more "accessible" to the layman?

Statement about recent growth theory
The article contains this statement:

The main implication of recent growth theory is that policies which embrace openness, competition, change and innovation will promote growth. Conversely, policies which have the effect of restricting or slowing change by protecting or favouring particular industries or firms are likely over time to slow growth to the disadvantage of the community.

This is very contentious. In fact in development economics there is a strong train of thought that policies to encourage LDCs to "embrace openness, competition, change and innovation" is in fact a policy that acts (intentionally or not) to inhibit their development to the advantage of more developed countries.

See http://www.paecon.net/PAEtexts/Chang1.htm and the book "Putting Development First: The Importance of Policy Space in the WTO and IFIs" edited by Kevin P. Gallagher http://www.bu.edu/ir/faculty/gallagher.html Worik (talk) 20:38, 15 February 2009 (UTC)

these theories are non valid —Preceding unsigned comment added by 117.200.81.243 (talk) 08:04, 3 April 2009 (UTC)

Look out for possible copyright violations in this article
This article has been found to be edited by students of the India Education Program project as part of their (still ongoing) course-work. Unfortunately, many of the edits in this program so far have been identified as plain copy-jobs from books and online resources and therefore had to be reverted. See the India Education Program talk page for details. In order to maintain the WP standards and policies, let's all have a careful eye on this and other related articles to ensure that no material violating copyrights remains in here. --Matthiaspaul (talk) 12:25, 1 November 2011 (UTC)

+ Look out for possible missing bits?
...

This para >

The initial research was based on the work of Kenneth Arrow (1962), Hirofumi Uzawa (1965), and Miguel Sidrauski (1967).[2] Paul Romer (1986), Lucas (1988),[3] and Rebelo (1991)[4][5] omitted technological change. Instead, growth in these models was due to indefinite investment in human capital which had spillover effect on economy and reduces the diminishing return to capital accumulation.[6]

> Missing name between [4][5] ? > Missing start of sentence, after [5] ?

Avaiki (talk) 13:46, 20 January 2012 (UTC)
 * The sentence makes sense, so perhaps no part of it is missing. [4][5] could be two refs for the same name? Jonpatterns (talk) 19:27, 2 June 2015 (UTC)

Romer Model
There is an draft article Draft:Romer_Model. Should this draft be fleshed out into its own article and released into main name space, or would it be better to merge contents into this article, or none of the above?Jonpatterns (talk) 19:27, 2 June 2015 (UTC)

Dr. Ghate's comment on this article
Dr. Ghate has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

"The statement

It is unlike neoclassical model, which is higher saving, s, promotes higher long-run per capita growth \gamma^*\,.

is not worded precisely. It should say,

A higher savings rate, s, and therefore higher investment, promotes higher long-run per capita growth \gamma^*\, This is in contrast to the standard neo-classical model where a rise in the savings rate does not have a permanent growth effect, but raises the level of per-capita income in the long run.

In criticisms, you should cite the work of Jones (1995)

Jones (1995) also shows in a sample of 15 OECD countries from 1950 to 1987, that changes in investment rates do not have any significant long run growth effects. He shows that shocks to investments - both total and durables and in particular durable equipment – have only a short-run growth effect with no significant effect on long run growth.

Jones, C.I., 1995. Time series test of endogenous growth models. Q. J. Econ. 110, 395–425.

The article can also differentiate between First Generation Endogenous Growth models and Second Generation Endogenous Growth Models."

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Ghate has published scholarly research which seems to be relevant to this Wikipedia article:


 * Reference : Monisankar Bishnu & Chetan Ghate & Pawan Gopalakrishnan, 2013. "Factor income taxation, growth, and investment specific technological change," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 13-04, Indian Statistical Institute, New Delhi, India.

ExpertIdeasBot (talk) 16:31, 19 May 2016 (UTC)

Dr. Chen's comment on this article
Dr. Chen has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

"Too simple, it should add more introduction on human capital and R&D model."

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Chen has published scholarly research which seems to be relevant to this Wikipedia article:


 * Reference 1: Zhang, Yan & Chen, Yan, 2009. "Tariff and Equilibrium Indeterminacy - A Global Analysis," MPRA Paper 18296, University Library of Munich, Germany.


 * Reference 2: Chen, Yan & Zhang, Yan, 2009. "Endogenous income taxes in OLG economies: A clarification," MPRA Paper 16824, University Library of Munich, Germany.

ExpertIdeasBot (talk) 16:35, 19 May 2016 (UTC)

Dr. Gomes's comment on this article
Dr. Gomes has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

"1)	In the first part of the article, where the notion of endogenous growth is explained, a few definitions and comments of prominent economists in the field would help in getting a more consolidated view on what is, in fact, endogenous growth. For instance, Phillipe Aghion and Peter Howitt (1998). Endogenous Growth Theory, Cambridge, MA: MIT Press, page 1, state that ‘(…) economic growth involves a two-way interaction between technology and economic life: technological progress transforms the very economic system that creates it. The purpose of endogenous growth theory is to seek some understanding of this interplay between technological knowledge and various structural characteristics of the economy and the society, and how such an interplay results in economic growth.’ In Robert Barro and Xavier Sala-i-Martin (2004). Economic Growth, 2nd edition, Cambridge, MA: MIT Press, it is mentioned, in the preface, how the new theory emerged: ‘Economists have, in some sense, always known that growth is important. Yet, at the core of the discipline, the study of economic growth languished after the late 1960s. Then, after a lapse of two decades, this research became vigorous again in the late 1980s. The new research began with models of the determination of long-run growth, an area that is now called endogenous growth theory.’ In Robert Solow (2000). “The Neoclassical Theory of Growth and Distribution.” BNL Quarterly Review, vol. 53, pp. 349-381, page 366, the following is claimed: ‘Beginning in the middle 1980s with the work of Romer (1986) and Lucas (1988) and continuing with a flood of articles there has been an active attempt to extend the neoclassical model by making the steady-state rate of growth itself and endogenous variable. In its first phase, ‘endogenous growth theory’ worked by trying to find plausible assumptions that would deny the existence of diminishing returns to the class of productive inputs that can be accumulated by some form of saving and investment. (…) The second phase of endogenous growth theory worked by trying to construct interesting and plausible models of the generation of technological progress as a normal profit-seeking economic activity.”

2)	In the models’ section, the sentence ‘growth in these models is due to indefinite investment in human capital which had spillover effect on economy and reduces the diminishing return to capital accumulation’ would, in my view, be better presented as ‘growth in these models is due to perpetual human capital accumulation, which has spillovers effects on the economy and lowers or even eliminates the diminishing returns to capital accumulation.’

3)	Second paragraph of the models’ section: introduce the word ‘growth’ in sentence ‘The AK model, which is the simplest endogenous model’, becoming ‘The AK model, which is the simplest endogenous growth model’.

4)	Sentence ‘If f(k)/k=A is substituted in the equation of transitional Dynamics of Solow-Swan model (exogenous growth model), and f(k) is the output function per worker, how an economy’s per capita incomes converges toward its own steady-state value, to the per capita incomes of other nations, can be seen.’ needs to be rearranged. Maybe something like: ‘By replacing f(k)/k=A into the Solow-Swan transitional dynamics equation (exogenous growth model), with f(k) the output per worker, one can observe the income convergence properties of the model.’

5)	Replace ‘on substituting A, this is gotten:’ by ‘Given f(k)/k=A, the above growth rate is presentable as:’.

6)	In the following paragraph, there are several problems: the rate of technological progress, x, is set to zero without being defined first; the English needs to be improved; a figure is mentioned but I see it nowhere; there is a formatting problem with ‘n + delta’.

7)	Below ‘since the two line(s) are parallel’: which lines?

8)	All this section (Models) needs to see its English improved.

9)	The reference to Samuel Fadare [8] is of little relevance in this context.

10)	The references presented in the notes are, many of them, incomplete (e.g., page numbers are missing in Lucas (1988) and Rebelo (1991)).

11)	There are many important contributions in the field of endogenous growth theory that are not mentioned in the article, as it is the case of:

a.	Jones, L. and R. Manuelli (1990). “A Convex Model of Equilibrium Growth: Theory and Policy Implications.” Journal of Political Economy, vol. 98, pp. 1008-1038. b.	Jones, C. (1995). “R&D Based Models of Economic Growth.” Journal of Political Economy, vol. 103, pp. 759-784."

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Gomes has published scholarly research which seems to be relevant to this Wikipedia article:


 * Reference : Helena Soares & Tiago Neves Sequeira & Pedro Macias Marques & Orlando Gomes & Alexandra Ferreira-Lopes, 2012. "Social Infrastructure and the Preservation of Physical Capital: Equilibria and Transitional Dynamics," Working Papers Series 2 12-04, ISCTE-IUL, Business Research Unit (BRU-IUL).

ExpertIdeasBot (talk) 12:41, 7 June 2016 (UTC)

Dr. Bambi's comment on this article
Dr. Bambi has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

"Suggestions for improvement:

1) The brief introduction as well as the section "Models" could be expanded. For example it could be added:

a) How public goods may promote economic growth with reference to the contribution of R.J. Barro (1990) "Government spending in a simple model of endogenous growth", Journal of Political Economy, 98, 103-125.

b) The role of financial markets and financial intermediaries to promote growth by helping the firms to finance their investments. For example R. Levine (2005) "Finance and Growth: Theory and Evidence" in Handbook of Economic Growth by P. Aghion and S. Durlauf. Elsevier North-Holland.

c) The role of institutions. See for example Chapter 11 in P. Aghion and P. Howitt "The Economics of Growth".

2) The Section "AK model" is too long, unnecessarily complicated and the economic intuition on the effect of constant returns to scale (from now on CRS) in capital should be improved. My suggestion is to present only one equation, i.e. the Solow model with an AK production function, and then observe that gross investments are always higher than the depreciation of capital provided that sA>delta. For this reason capital may expand forever. A remark could also be added explaining why the same cannot happen with decreasing returns to scale.

3) Given the current state of the article, a reader could be led to believe that CRS is a necessary condition for endogenous growth. This is not true. In fact, it should be pointed out that endogenous growth may also emerge with increasing returns to scale with reference to P. Romer (1986) “Increasing returns and long-run growth”, Journal of Political Economy, 94, 1002-1037.

4) The section “Endogenous vs Exogenous growth theory” is misleading since it seems to imply that exogenous growth models are not micro-founded which is clearly untrue. Overall, I found this section unnecessary and I would rather replace it with a new section on the mechanisms which may explain how a no-growing economy could start to grow. See, for example, O. Galor (2011) “Unified growth theory”, Princeton University Press.

5) The section “Implications” is again misleading because it seems to imply that policy promoting innovations are always welcomed. However, several endogenous growth models such as Romer’s and Barro’s, suggest that it exists an optimal investment to innovate or to the public good and that over-investment may be growth detrimental.

Inaccuracies, wrong interpretations or omissions:

1) The sentence "The endogenous growth theory primarily holds that the long run growth rate of an economy depends on policy measures" should be removed and replaced by "Although policy measures may affect the growth rate of an economy, they are not necessarily its main determinant." Also in the next sentence starting with "For example," a "may" should be added before "increase".

2) The first two sentences "The AK model works on the property of absence of diminishing returns to capital. The simplest form of production function with non-diminishing return is:" should be so modified: "In the AK model, capital is the only (accumulating) factor of production and it is defined in a broad sense to include not only physical capital but also, for example, human capital and knowledge. For this reason, the production function has constant returns to scale in capital instead of diminishing returns as in exogenous growth models." Also a hyperlink to the Wikipedia article ""returns to scale" should be added."

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Bambi has published scholarly research which seems to be relevant to this Wikipedia article:


 * Reference : Mauro Bambi, 2006. "Endogenous growth and time to build: the AK case," Computing in Economics and Finance 2006 77, Society for Computational Economics.

ExpertIdeasBot (talk) 13:38, 11 June 2016 (UTC)

Dr. Prettner's comment on this article
Dr. Prettner has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

"In my opinion the article should focus much more on the R&D-based endogenous growth model of Romer (1990), which is seen as the central breakthrough in this area and the starting point of the so called New Growth model.

The framework is mentioned only in one sentence and I did not find the original (highly cited and celebrated) reference in the text. It is this one:

Romer, P. (1990). Endogenous technological change. Journal of Political Economy, 98 (5): pp. 71-102.

When I have a bit more time I will try to include a basic description of Romer's model in the Wikipedia entry.

Apart from that a lot of extensions could be discussed and added by this would not be as crucial as the above comment."

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Prettner has published scholarly research which seems to be relevant to this Wikipedia article:


 * Reference : Michael Kuhn & Klaus Prettner, 2012. "Growth and welfare e ffects of health care in knowledge based economies," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 120, Courant Research Centre PEG.

ExpertIdeasBot (talk) 08:20, 28 June 2016 (UTC)

Dr. Etro's comment on this article
Dr. Etro has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

"It lacks a discussion of the most important E.G. theories. the AK model is only a minor starting point. Schumpeterian growth theory should be discussed"

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

ExpertIdeasBot (talk) 20:16, 24 September 2016 (UTC)

Comment on Dr. Etro's opinion
I agree with Dr. Etro. This article is too concentrated on Romer's growth theory. Howitt differentiate the first and second generations among the New Growth Theory. Romer and Lucus belong to the the first generation, whereas Schumpeterian growth theory and evolutionary growth theory comprises the second generation.

The long citation from Howitt is not exact. The original text is in the conclusion in Peter Howitt (2007) Innovation, Competition and Growth: A Schumpeterian Perspective on Canada's Economy. C.D. Howe InstituteCommentary No. 246, (April) 2007. The text appears in page 13.

I do not correct it now, because it will be necessary to restructure at least some part of the article. Howitt is rather critical to the first generation New Growth Theory. It is necessary to first describe the difference of two generations and put the citation in a correct place.Anthro-apology (talk) 12:29, 16 November 2016 (UTC)

Dr. Gil's comment on this article
Dr. Gil has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

"First paragraph of the section "Models": "Paul Romer (1986), Robert Lucas (1988), Sergio Rebelo (1991)[3] and Ortigueira and Santos (1997) omitted technological change; instead, growth in these models is due to indefinite investment in human capital which had spillover effect on economy and reduces the diminishing return to capital accumulation."

The reference to Paul Romer (1986) does not seem to be accurate. This is not a model of human capital accumulation. In Romer's (1986) words: "It is essentially a competitive equilibrium model with endogenous technological change." Later, Romer (1990) reconized that the endogenous-growth mechanism in his earlier model could be interpreted as a "learning-by-doing" mechanism of knowledge accumulation, in the spirit of Arrow (1962).

"The AK model, which is the simplest endogenous model, gives a constant-savings rate of endogenous growth and assumes a constant, exogenous, saving rate. It models technological progress with a single parameter (usually A). It uses the assumption that the production function does not exhibit diminishing returns to scale to lead to endogenous growth. Various rationales for this assumption have been given, such as positive spillovers from capital investment to the economy as a whole or improvements in technology leading to further improvements (learning by doing)."

The reference to "... the assumption that the production function does not exhibit diminishing returns to scale...", while being true, seems to somehow miss the point. It would be better to say: "... the assumption that the production function does not exhibit marginal diminishing returns to the accumulable inputs (in the case, the stock of capital)...".

First paragraph of the section "Criticisms": "One of the main failings of endogenous growth theories is the collective failure to explain conditional convergence reported in empirical literature."

This is too vague. The endogenous growth models that exhibit transitional dnamics are able to explain conditional convergence. For example, the seminal empirical paper on convergence -- Barro (Quarterly Journal Ec, 1991) -- shows that empirical evidence supports the predictions by Lucas (1988) for the transitional growth rate (a seminal endogenous growth paper base on human capital accumulation)."

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

We believe Dr. Gil has expertise on the topic of this article, since he has published relevant scholarly research:


 * Reference : Pedro Mazeda Gil & Fernanda Figueiredo, 2010. "Firm Size Distribution under Horizontal and Vertical R&D," FEP Working Papers 389, Universidade do Porto, Faculdade de Economia do Porto.

ExpertIdeasBot (talk) 11:14, 22 December 2016 (UTC)

External links modified
Hello fellow Wikipedians,

I have just modified 2 one external links on Endogenous growth theory. Please take a moment to review my edit. If you have any questions, or need the bot to ignore the links, or the page altogether, please visit this simple FaQ for additional information. I made the following changes:
 * Added archive https://web.archive.org/web/20151021205217/http://www.newschool.edu:80/nssr/het/essays/growth/moneygrowth.htm to http://www.newschool.edu/nssr/het/essays/growth/moneygrowth.htm
 * Added archive https://web.archive.org/web/20120324110809/http://www.eurojournals.com:80/MEFE_8_12.pdf to http://www.eurojournals.com/MEFE_8_12.pdf

When you have finished reviewing my changes, please set the checked parameter below to true or failed to let others know (documentation at ).

Cheers.— InternetArchiveBot  (Report bug) 06:33, 24 December 2016 (UTC)

External links modified
Hello fellow Wikipedians,

I have just modified one external link on Endogenous growth theory. Please take a moment to review my edit. If you have any questions, or need the bot to ignore the links, or the page altogether, please visit this simple FaQ for additional information. I made the following changes:
 * Added archive https://web.archive.org/web/20110717090449/http://www.cdhowe.org/pdf/commentary_246.pdf to http://www.cdhowe.org/pdf/commentary_246.pdf

When you have finished reviewing my changes, you may follow the instructions on the template below to fix any issues with the URLs.

Cheers.— InternetArchiveBot  (Report bug) 16:16, 10 December 2017 (UTC)

AK model and Figure 1.1
The section on the "AK model" refers to "Figure 1.1", which does not appear in the article, and it's not obvious where it appears. Moreover that entire section is confusing, including many terms that are not defined in addition to the phantom Figure 1.1. Since there is a separate complete article on the "AK model", I will replace this section with the following from the article on the AK model:


 * The AK model production function is a special case of a Cobb–Douglas function with constant returns to scale.
 * $$Y=AK^aL^{1-a}\,$$


 * This equation shows a Cobb–Douglas function where Y represents the total production in an economy. A represents total factor productivity, K is capital, L is labor, and the parameter $$a$$ measures the output elasticity of capital. For the special case in which $$a = 1$$, the production function becomes linear in capital and does not have the property of decreasing returns to scale in the capital stock, which would prevail for any other value of the capital intensity between 0 and 1.

The following is what I deleted, included here to make it easier for someone to restore some of it either here or on the AK model article:
The AK model works on the property of absence of diminishing returns to capital. The simplest form of production function with non-diminishing return is:


 * $$Y = AK\,$$

where
 * $$ A\,$$, is a positive constant that reflects the level of the technology.


 * $$ K \,$$ capital (broad sense to include human capital)

Now, assume output per capita be determined by the constant $$A>0\,$$


 * $$y = Ak\,$$ ,

$$k$$ = capital per worker $$y$$ = output/income per worker

If $$\frac{f(k)}{k}=A \,$$ is substituted in the equation of transitional Dynamics of Solow-Swan model (exogenous growth model), and f(k) is the output function per worker, how an economy’s per capita incomes converges toward its own steady-state value, to the per capita incomes of other nations, can be seen.

The transitional dynamics equation, in which the growth rate on $$ k\,$$ is given by


 * $$\gamma_K=\dot{k}/k = s\frac{f(k)}{k} - (n+\delta)\ ,$$

on substituting $$ A\,$$, this is gotten:
 * $$\gamma_K= sA -(n+\delta)\ ,$$

The case of zero technological progress, $$ x=0\,$$, is returned to because per capita growth can now occur in the long-run even without exogenous technological change. The figure 1.1 explains the perpetual growth, with exogenous technical progress. The vertical distance between the two line, $$ sA\,$$and n+δ gives the$$\gamma_K\,$$

As, $$ sA>\, $$n+δ, so that$$\gamma_K > 0\,$$. Since the two line are parallel, $$\gamma_K\,$$is constant; in particular, it is independent of $$K\,$$. In other words,$$K\,$$ always grows at steady states rate,$$\gamma_K^*= sA -(n+\delta)\ ,$$.

Since
 * $$y = AK\,$$,$$\gamma_K\,$$ equals $$\gamma_K^*\,$$

at every point of time. In addition, since
 * $$c= (1-s) y\,$$,

the growth rate of
 * $$c\,$$ equals $$\gamma_K^*\,$$.

Hence, the entire per capita variable in the model grows at same rate, given by
 * $$\gamma^*= sA -(n+\delta)\ ,$$

However, $$y = AK\,$$ technology displays a positive long-run per capita growth without any exogenous technological development. The per capita growth depends on behavioural factors of the model as the saving rate and population. It is unlike neoclassical model, which is higher saving, s, promotes higher long-run per capita growth $$\gamma^*\,$$.

DavidMCEddy (talk) 17:13, 10 October 2018 (UTC)

India Education Program course assignment
This article was the subject of an educational assignment at Symbiosis School of Economics supported by Wikipedia Ambassadors through the India Education Program&#32;during the 2011 Q3 term.&#32;Further details are available on the course page.

The above message was substituted from by PrimeBOT (talk) on 20:05, 1 February 2023 (UTC)