Endogenous Growth Theory

Recall that the growth model of Harrod-Domar, Kaldor-Robinson, Solow-Swan, Cass-Koopmans makes explicit or implicit "technical exogenous" technical changes. In Schumpeter version, it is not so. We have created "individual" inventors under certain conditions. Due to previous technical circumstances Smith and Ricardo models also experienced technical changes due to the narrowing down of profits and the special circumstances of Smith. Allyn A. Young (1928) advocated the revival of the concept of Smith from the perspective of increasing the scale of compensation once. In other words, division of labor promotes economic growth, thereby further division of labor, thereby achieving faster growth.

Along with the development of "endogenous growth theory" in the latter half of the 1980s, research on inflation and growth has changed. Endogenous growth theory explains growth through factors of production function. In the new growth model, growth depends on the return on capital, so expanding the endogenous growth model through currency analysis shows how inflation affects the return on capital (01 Gokal & Hanif, 2004, p. 16). Study on the relationship between inflation and economic growth in endogenous growth theory

In the 1980s and 1990s, endogenous growth theory began to challenge neoclassical growth theory. The model of this group is not an exogenous technical improvement explaining the growth of the Solow model but explains economic growth through endogenous decisions, other factors such as increase in return on capital scale and learning by execution To do. Macroeconomic policy is usually implemented through two tool sets: fiscal policy and monetary policy. Both forms of policy are used to stabilize the economy. It may mean raising the economy to the level of GDP consistent with full employment. Macroeconomic policy focuses on limiting the impact of the business cycle to achieve economic goals of price stability, full employment and growth

The neoclassical growth theory believes that an increase in the investment level increases the steady-state output of each worker, thereby increasing the growth rate of production. On the other hand, endogenous growth theory uses scale economies and spillover to support ways to improve investment for growth. In other words, these two theories predict the large impact of investment levels on economic growth. As you know, government expenditure affects economic growth. There is a record showing that expenditure on government education, infrastructure and other productive capital is driving growth. On the other hand, non-productive government expenditure may inhibit growth