Neoclassical vs. Endogenous Growth Analysis: An Overview / Bennett T. McCallum.

By:

McCallum, Bennett T

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w5844.Publication details: Cambridge, Mass. National Bureau of Economic Research 1996.Description: 1 online resource: illustrations (black and white)Online resources:

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Hardcopy version available to institutional subscribers

Abstract: This paper begins with an exposition of neoclassical growth theory, including several analytical results such as the distinction between golden-rule and optimal steady states. Next it emphasizes that the neoclassical approach fails to provide any explanation of steady-state growth in per capita values of output and consumption, and also cannot plausibly explain actual growth differences by reference to transitional episodes. Three types of endogenous growth models, which attempt to provide explanations of ongoing per-capita growth, are presented and discussed. The likelihood of strictly justifying steady-state growth with these models is very small, since it would require highly special parameter values, but the models' predictions may be reasonably accurate nevertheless.

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November 1996.

This paper begins with an exposition of neoclassical growth theory, including several analytical results such as the distinction between golden-rule and optimal steady states. Next it emphasizes that the neoclassical approach fails to provide any explanation of steady-state growth in per capita values of output and consumption, and also cannot plausibly explain actual growth differences by reference to transitional episodes. Three types of endogenous growth models, which attempt to provide explanations of ongoing per-capita growth, are presented and discussed. The likelihood of strictly justifying steady-state growth with these models is very small, since it would require highly special parameter values, but the models' predictions may be reasonably accurate nevertheless.