Endogenous Growth Theory Essay Example | Topics and Well Written Essays - 750 words

Endogenous Growth Theory - Essay ExampleThe paper focuses on endogenous maturement and utilises two major approaches to deal with the issue. These are namely the convergence controversy approach and the domain of market competition (Romer). Romers contention is to fill out gaps in existing endogenous theory to make it to a greater extent accountable for growth patterns in developing and veritable countries.Historically the neo-classical model has attributed sparing growth to technology. Another basic assumption is that technology is freely ready(prenominal) to all countries in the ball since a perfect competition market exists (Rebelo). Romer uses the Cobb-Douglas production and cross-country regression models in order to bring out that endogenous factors can better explain such growth than exogenous models. He attributes growth to enthronisations in human beings capital, innovation and cognition whose spill over effects tend to augment the economy as a whole . The Philip pines has been compared to the United States in order to bring out the savings rates that would be required by both nations to possess an equal level of economic growth. Romer argues that if the Philippines and the United States possessed the same(p) level of technology, then their disaccording growth rates could be attributed to differences in labour productivity al maven. It has been estimated that the share of investment funds in the United States is at least twice as large as it would have to be in the Philippines for a similar rate of growth. The lack of convergence between the growth rates for poorer countries and the more rich countries tends to indicate that the differences may be attributed to more than just technology. The rate of and amount of investment tends to differ between the North and the South. Using the neo-classical model, it would be hard to explain why the model attributes low investment in the North while that is not the case. The Summer-Heston model has bee n used in this regard to look into investments into human resources and capital to bring out the differences (Barro and Sala-i-Martin). Romer concludes this section by delineating that the only difference between developing and developed nations may not just be the availability of data that is blamed by neo-classical economists for a in general fitting model. In the second section, Romer argues that aggregate level models had been missing in order to explain growth throughout the fifties, sixties and the seventies. He also expounds that certain assumptions have always been assumed as such but have not been explored to see their effects on growth models. It is generally assumed that on that point are many firms in an economy but it may be that these are concentrated to opt a monopolistic market structure. Scientific discoveries are not accessible to all entities operating in an economy since information is required to turn the scientific discovery into useful output. The shortage of information from one national economy to another (such as through trade secretes) signifies that scientific discoveries are not available to all and sundry. Another issue is the replication of physical activities which is not possible since all involved factors cannot be scaled up similarly all the time to receive an equally scaled up output. scientific developments are taken as having derived from factors external to the control of individuals. However, the application of human resources and attention is typically how scientific progress is derived. Hence, assuming that technological progress is an exogenous factor is highly misleading (Sachs and Warner). Additionally, economic entities with the military unit to create new information and knowledge often possess the power to manipulate the information and knowledge into monopolistic systems. This would indicate that the owner of the information a