Tiêu đề Endogenous Growth Model.pdf ✅

The Basic Model of Endogenous Growth – AK Model Shashi Kr Shaw [email protected] Assistant Professor Economics Banwarilal Bhalotia College, Asansol, Kazi Nazrul University, West Bengal (India) 1. The Endogenous Growth Model The Endogenous Growth Model is an alternative to the traditional neoclassical model of economic growth. Unlike the neoclassical model, which assumes that technological progress is exogenous and beyond the control of policymakers, the endogenous growth model argues that technological progress is endogenous and can be influenced by policies and institutions. In the endogenous growth model, technological progress is seen as the result of investment in research and development (R&D) and human capital. The accumulation of knowledge and skills through education and training is critical to the growth process. Thus, the role of policies in promoting R&D and education is emphasized. The endogenous growth model also emphasizes the importance of positive externalities or spillovers. These occur when the benefits of technological progress spill over to other firms or industries, leading to further innovation and growth. Positive externalities arise from the sharing of knowledge and skills, the creation of new markets, and the development of new technologies. Critics of the endogenous growth model argue that it overemphasizes the role of R&D and education in the growth process and neglects the importance of other factors such as natural resources and institutions. They also argue that the model assumes that there are no limits to knowledge accumulation and technological progress, which may not be realistic. Overall, the endogenous growth model offers a more nuanced and dynamic understanding of economic growth, emphasizing the role of policies and institutions in promoting innovation and knowledge accumulation.

model allows for increasing returns to scale, meaning that as the scale of production increases, the marginal cost of production decreases, leading to greater productivity and output growth. 4.Savings and investment: The exogenous growth model assumes that savings and investment rates are exogenous, or determined outside the economic system. In contrast, the endogenous growth model posits that savings and investment rates are endogenously determined within the economy, and can be influenced by factors such as technological progress and returns to capital. 5.Steady state: The exogenous growth model typically assumes that the economy will reach a steady state, where the growth rate of output and capital stock will eventually converge to zero with no technological progress. In contrast, the endogenous growth model allows for the possibility of sustained economic growth, where the economy can continue to grow at a positive rate even in the long run, driven by endogenous technological progress and productivity growth. 4. The AK Model The first version of endogenous growth theory was AK theory, which did not make an explicit distinction between capital accumulation and technological progress. In effect it lumped together the physical and human capital. An early version of AK theory was produced by Frankel (1962), who argued that the aggregate production function can exhibit a constant or even increasing marginal product of capital. This is because, when firms accumulate more capital, some of that increased capital will be the intellectual capital that creates technological progress, and this technological progress will offset the tendency for the marginal product of capital to diminish. In the special case where the marginal product of capital is exactly constant, aggregate output Y is proportional to the aggregate stock of capital K: Y = AK Where A is a positive constant that reflects the level of technology and ‘K’ here is taken in a broader sense as it includes physical as well as human capital. This model shows constant marginal product to capital (as MPk = dY/dK=A) AK model is a simple way of illustrating endogenous growth. Assuming a closed economy, the savings are equal to investment in equilibrium. Since savings are the function of income (S= sY)