What Is Exogenous Growth?

Exogenous growth, a key tenet of neoclassical economic theory, states that economic growth is fueled by technological progre🌳ss independent of econo⭕mic forces.

Understanding Exogenous Growth

The exogenous growth theory states that 澳洲幸运5官方开奖结果体彩网:economic growth arises due to influences outside the 🌊economy. The underlying assumption is that economic prosperity is primarily determined by external, independent factors as opposed to internal, interdependent factors.

From a broad economic sense, the concept of exogenous growth grew out of the 澳洲幸运5官方开奖结果体彩网:neoclassical growth model. The exogenous growth model factors in production, diminishing 澳洲幸运5官方开奖结果体彩网:returns of capital, savings rates, and technological variablesꦗ to determine economic growth.

Exogenous Growth vs. Endogenous Growth

The exogenous growth and 澳洲幸运5官方开奖结果体彩网:endogenous growth theories are part of the neoclassical growth models. Both models stress the role of technological progress in achieving sustained economic growth. However, the former posits that technological progress alone, outside of the economic system, is the key determinant in maximizing 澳洲幸运5官方开奖结果体彩网:productivity, whereas the latter suggests that an economy's long-term growth is a byproduct of the activities within that economic system that result ﷺin technological pr🧜ogress.

Exogenous (external) growth factors include things such as the rate of technological advancement or the 澳洲幸运5官方开奖结果体彩网:savings rate. Endogenous (internal) growth factors, meanwhile, would be capital investment, policy decisions, and an expanding workforce population. These factors are modeled by the 澳洲幸运5官方开奖结果体彩网:Solow model, the Ramsey model, and the Harrod-Domar model.

To sum up these models, given a fixed amount of labor and static technology, economic growth will cease at some point as ongoing production reaches a state of 澳洲幸运5官方开奖结果体彩网:equilibrium based on internal demand factors. Once this equilibrium is reached, e♛xogenous factors are then needed to stoke growth.