Endogenous growth
Growth theory that explains technology inside the model, through investment in knowledge and human capital. Because spillovers offset diminishing returns, saving and policy can raise long-run growth permanently.
Where you will meet it
Endogenous growth appears in 2 learning outcomes on the CFA syllabus. A few of them:
- Contrast the classical, neoclassical and endogenous theories of growth
“Endogenous growth theory explains technology inside the model: knowledge spillovers offset diminishing returns, so more saving can raise growth permanently.”
- Explain the economic case for governments encouraging private investment in knowledge and technology
“In endogenous growth models such policies can raise long-run growth.”
See also
Diminishing returns · Human capital · Spillovers
Practise it
Practise endogenous growth until it is automatic: questions that explain every wrong option.
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