In the Solow model, the growth in the steady state is considered exogenous because it is determined by factors outside the model itself. These factors include technological progress, population growth, and the rate of savings and investment.
However, some other models make growth endogenous, meaning that it is explained by factors within the model. These models introduce additional mechanisms and interactions to explain how growth is generated.
One such model is the endogenous growth theory, which emphasizes the role of technological progress as an endogenous variable. In these models, investments in research and development (R&D) and knowledge accumulation are key drivers of long-term economic growth. Technological progress is not simply assumed to happen exogenously, but rather it is endogenously determined by factors such as innovation, education, and spillover effects.
Another example is the neoclassical growth model augmented with human capital. In this model, human capital, which captures the skills and knowledge of workers, is considered an important factor in the production process. Increased investments in education and training can lead to higher productivity and economic growth.
Furthermore, some models incorporate the role of institutions and policies in promoting growth. These models consider that the quality of institutions, such as property rights protection, rule of law, and efficient public administration, can have a significant impact on economic growth. By creating a favorable environment for investments and innovation, institutions can generate endogenous growth.
Overall, endogenous growth models seek to explain the sources of sustained economic growth within the model itself by considering various factors such as technological progress, human capital, and institutional development.
In what sense out the growth in the steady stateof solow model "exogeneous" ?. Briefly outline how some others models make such growth endogenous?
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