Endogenous Growth Theory - Explained
What is Endogenous Growth Theory?
Written by Jason Gordon
Updated at April 24th, 2022
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Table of Contents
What is Endogenous Growth Theory?Why is Endogenous Growth Theory Important?Factors Connected to Endogenous Economic GrowthAcademic Research on Endogenous Growth TheoryWhat 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
- 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