Question

Explain the important difference between the Solow growth model and any of the endogenous growth models.

Answer 1

Solow model treats technological progress as exogenous. On the other hand, endogenous growth model assumes that technological progress is the result of the allocation of resources to the creation of new technologies i.e., technological progress is endogenous. While Solow Model talks about the variable, effectiveness of labor (A), it fails to specify its exact meaning as its behavior is assumed to be exogenous. On the other hand, what endogenous growth model does is that it explicitly interprets the effectiveness of labor as knowledge and in modeling the determinants of its evolution over time.