Endogeneous growth model depicts that investment in knowledge, human capital and innovation are the main contributors of economic growth. It aims to show economic development as a result of knowledge spillover effect and a prolonged investment in building human capital by investing in education and innovation essential for long run growth of the economy.
A simple endogeneous model is the AK model where parameter A represents technological progress. The model does not require the assumption of diminishing returns to scale. The model is trying to promote economies which favour openness to trade, competition, innovation and change will promote growth in the long run.
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