Endogenous Verses Exogenous Growth

Endogenous and Exogenous Growth Theories
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Endogenous and Exogenous Growth Theories
Economic growth theories describe how economies grow and do not express why the economies grow. Economic growth is based on the proportion variation of goods and services over a certain period. The exogenous growth source, also known as neoclassical, relates to technology, a theory relating to an economy's growth. For endogenous economic growth, check on policy measures in subsidies based on education, Research, and Development centers (R&D). This paper aims to analyze the two economic growth concepts, the endogenous and exogenous growth theories, and government policies on economic growth on a long-term basis.
The endogenous theory is based on internal forces that drive the economy inside a structure. The internal structure primarily aims at the technological impact of better and efficient production methods generating profitable income impacted by human capital. Human capital is the value of workers based on their skills, knowledge, and experience, leading to added economic value. When workers discover better technological skills, then profits are easily generated, and there is a possibility of accelerated growth in the creation of better services in an economy (Paciello & Wiederholt, 2014). Economists believe that innovation in production plays a crucial role in developing an economy since this is concerning investment. R&D is among tools used to foster creativity in employees, ensuring that there is growth among the people every day.
Through innovation, governments make sure that competition in other markets exists, which leads to better ideas of innovations that generate more income for a government. Entrepreneurship is another way a government may boost the economy. More jobs create more capital returns and profits for the states and create job markets for the people. Therefore, everyone has somewhere to generate income rather than idle, which pulls down the economy on an enormous scale. There is always an increase in the scale of capital investment returns in health, telecommunication and infrastructure, and education. Infrastructure helps an economy in the long -term since it acts as a means for generating income for a very long period. R&D has also proven to become a fundamental concept to ensure technological progress and entrepreneurship (Paciello & Wiederholt, 2014)
Exogenous theory's term economic development influences external forces in line with the neoclassical growth model. The neoclassical model involves three technological, capital, and labor as the most considerable driving forces. The external pressures of exogenous theory involve the technological rates and saving rates. The exogenous approach is mainly under the control of the key players who are of the industry/company and only rely on reaction and not absor...