What is Endogenous Growth Theory?

The endogenous theory is a financial theory which argues that financial or economic growth is generated from internal (rather than external) procedures and inputs. The theory notes that productivity can be improved by the efficiency of a skilled labor force and by rightly using technology.

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Why is Endogenous Growth Theory Important?

The Endogenous growth theory contrasts with neoclassical economic theory, which contends that technological development and other external elements are the primary sources of monetary and economic growth. Most notably, endogenous growth economists believe that improvements in productivity can be tied directly to faster innovation and greater investments in human capital. They focus upon the effects of providing better training methods, research and development, and more innovative ways of production. So, if the firm wants to achieve sustainable growth, it would need to invest in endogenous inputs, such as human capital, research, innovative technologies, and other endogenous factors.

Factors Connected to Endogenous Economic Growth

Many factors needed for endogenous growth come from public and private sector contribution to production environment.

• The government has the ability to raise a country's economic growth rate. The authorities can do it by forming and encouraging more competitive markets which leads to more productivity and generate healthy competition among enterprises.
• Capital investment in infrastructure and investment in schooling and fitness and telecommunications.
• Non-public, regional investment in research & improvement is a key supply of technological progress.
• Property rights (such as patents) are essential to supplying incentives for corporations and marketers to engage in studies and improvement.
• Funding in human capital is a crucial factor of growth.
• Government spending to inspire entrepreneurship as a method of creating new companies and ultimately as an important supply of recent jobs, investment, and further innovation.

Related Topics

• What is Government Spending?
• Autonomous Spending
• Autonomous Consumption
• Fiscal Policy
• Expansionary Fiscal Policy
• Contractionary Fiscal Policy
• Progressive vs Regressive Tax
• Marginal Tax Rates
• Proportional Tax
• Trickle Down Theory
• Discretionary Fiscal Policy
• Automatic Stabilizers
• Effects of Discretionary Policy (Interest Rates & Lags)
• Crowding Out Effect 
• National Debt
• Government Borrowing
• Golden Rule
• Ricardian Equivalence
• Balanced Budget - Deficit and Surplus
• National Debt
• Standardized Employment Budget
• Deficit Hawk
• Austerity
• Twin Deficits
• Fiscal Policy and the Aggregate Supply and Demand Curve
• Stabilization Policy
• Robin Hood Effect
• Ricardo Barro Effect
• Automatic Stabilizers
• Standardized Employment Budget
• How Does Fiscal Policy Affect Interest Rates? 
• Crowding Out
• Types of Lag in Fiscal Policy
• Temporary and Permanent Fiscal Policy
• Limitations of Fiscal Policy?
• How Politics Affects Discretionary Fiscal Policy
• Government Borrowing
• National Savings and Investment Identity
• Debtor Nation
• Fiscal Policy Affects Trade Balances
• Twin Deficits
• Exchange Rates Affect Budget and Trade Deficits
• What are the risks of chronic large deficits in the United States?
• How Fiscal Policy Can Affect Trade Imbalances
• Government Borrowing Affect Private Savings
• Ricardian Equivalence
• Fiscal Policy Affects Investment and Economic Growth
• Crowding Out of Physical Capital Investment?
• How Does Government Borrowing Affect Interest Rates in Financial Markets?
• Government Investment in Physical Capital
• Public Investment in Human Capital
• Fiscal Policy Can Affect Technology Development

• Economic Cycle or Business Cycle
• Business Cycle Indicator
• Peak and Trough
• Recession and Depression
• Hard Landing vs Soft Landing
• Economic Bubble
• Boom and Bust Cycle
• Great Depression
• Baby Boomer Age Wave Theory

• Skyscrapper Effect (Economics)
• V-Shaped Recovery
• W-Shaped Recovery
• U-Shaped Recovery
• Kondratieff Wave Cycle
• Contagion
• Feedback Rule Policy
• American Customer Satisfaction Index
• CNN Effect
• Bureau of Economic Analysis
• Business Starts Index
• American Recover and Reinvestment Act
• Abenomics
• Emergency Economic Stabilization Act of 2008
• Commodity Credit Corporation
• Humphrey Hawkins Act

• Real Economic Growth Rate
• Fox-Trot Economy

• Stagnation
• Neoclassical Growth Theory
• Exogenous Growth Theory
• Endogenous Growth Theory
• New Growth Theory - Explained
• Classical Growth Theory - Explained
• Real Economic Growth Rate - Explained
• Plutonomy