Neoclassical vs. Endogenous Growth Analysis: An Overview

48 Pages Posted: 20 Jul 2000

See all articles by Bennett T. McCallum

Bennett T. McCallum

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

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Date Written: November 1996

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.

Suggested Citation

McCallum, Bennett T., Neoclassical vs. Endogenous Growth Analysis: An Overview (November 1996). NBER Working Paper No. w5844, Available at SSRN: https://ssrn.com/abstract=225629

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