NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Neoclassical vs. Endogenous Growth Analysis: An Overview

Bennett T. McCallum

NBER Working Paper No. 5844 (Also Reprint No. r2125)
Issued in November 1996
NBER Program(s):   EFG

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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Document Object Identifier (DOI): 10.3386/w5844

Published: Bennett T. McCallum, 1996. "Neoclassical vs. endogenous growth analysis: an overview," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 41-71. citation courtesy of

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