Economics Dictionary of ArgumentsHome
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| Endogenous growth: the Endogenous growth theory in economics suggests that economic growth is primarily driven by internal factors, such as investment in human capital, innovation, and knowledge. These elements are endogenous to the economy, meaning they are influenced by policy decisions and within the control of economic agents. See also Economic growth, Exogenous growth, New Growth Theory._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Robert C. Feenstra on Endogenous Growth - Dictionary of Arguments
Feenstra I 10-1 Endogenous growth/Ricardo/Feenstra: The link between trade and growth has long been a question of interest from both a theoretical and policy point of view. David Ricardo developed a dynamic model of corn and velvet production, with corn produced by land and labor and velvet produced with labor alone.* The need to pay labor from a “wage fund” established prior to production prevents all labor from being employed initially (i.e. there is a liquidity constraint on firms). Ricardo showed that in autarky the gradual expansion of the wage fund and growth of velvet production would lower ist relative price, until a long-run equilibrium was reached. Opening trade, however, would allow the relative price of velvet to be maintained at world levels, thereby benefiting capitalists at the expense of landowners. Feenstra: This remarkable model has many of the issues that are of interest in modern discussions of trade and growth: the possibility that growth will be associated with continual changes in prices, and conversely, the impact of trade on prices and growth rates themselves. >Economic growth, >Exogenous growth, >Trade, >International trade, >Price, >Terms of trade. * See Findlay (1984, pp. 187-191)(1), who cites this model to Ricardo’s Essay on the Influence of a Low Price of Corn upon the Profits of Stock (in Volume IV, pp. 1-42, of Ricardo, 1951(2)). 1. Findlay, Ronald, 1984, “Growth and Development in Trade Models,” in Ronald W. Jones and Peter B. Kenen, eds., Handbook of International Economics, vol. 1. Amsterdam, New York: North Holland, 325-365. 2. Ricardo, David, 1951, The Works and Correspondence of David Ricardo, P. Sfaffa, ed. Cambridge: Cambridge University Press. - - - Feenstra I 10-16 Endogenous growth/Feenstra: Many of the “endogenous growth” models build upon the monopolistic competition framework (…), but rather than thinking of differentiated final products, we instead consider differentiated intermediate inputs. The idea is that an increase in the variety (N) of differentiated inputs will allow for an increase in output, much like an increase in variety of final goods allowed for higher consumer utility (… )* >Monopolistic competition, >Economic growth, >Exogenous growth. Feenstra I 10-30 (…) [an] implication of the endogenous growth model was that, with international spillovers of knowledge, trade should increase growth rates. >Knowledge spillover. There is an active debate over whether this hypothesis holds empirically. Advocates of this view includes Dollar (1992)(2), Sachs and Warner (1995)(3), Edwards (1998)(4), Ben-David (1993(5), 1998(6), 2001(7)), and Frankel and Romer (1999)(8). But these empirical results are all dismissed by Rodriguez and Rodrik (2000)(9), and more specific criticisms on individual papers are made by Harrison (1996)(10) and Slaughter (2001)(11). In order to evaluate these papers, it is useful to first relate them to another line of empirical research dealing with the convergence of countries to their steady-state growth rates. * The use of differentiated inputs to generate economy-wide returns to scale is often attributed to Ethier (1979)(1). 1. Ethier, Wilfred J., 1979, “Internationally Decreasing Costs and World Trade,” Journal of International Economics, 9, 1-24. 2. Dollar, David, 1992, “Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985,” Economic Development and Cultural Change, 40(3), 523-544. 3. Sachs, Jeffrey and Andrew Warner, 1995, “Economic Reform and the Precess of Global Integration,” Brooking Papers on Economic Activity, 1, 1-118. 4. Edwards, Sebastian, 1998, “Openess, Productivity and Growth: What Do We Really Know?” Economic Journal, 108, March, 383-398. 5. Ben-David, Dan, 1993, “Trade Liberalization and Income Convergence,” Quarterly Journal of Economics, 108(3), August, 653-679. 6.Ben-David, Dan, 1998, “Convergence Clubs and Subsistence Economies,” Journal of Development Economics, 55(1), February, 155-171. 7. Ben-David, Dan, 2001, “Trade Liberalization and Income Convergence: A Comment,” Journal of International Economics, 55(1), October, 229-234. 8. Frankel, Jeffrey A. and David Romer, 1999, “Does Trade Cause Growth?” American Economic Review, 89(3), 379-399. 9. Rodriguez, Francisco and Dani Rodrik, 2000, “Trade Policy and Economic Growth: A Skptic’s Guide to the Cross-Nationa lEvidence,” in Ben S. Gernanke and Kenneth Rogoff, eds., NBER Macroeconomics Annual 2000, 261-325. 10. Harrison, Ann E., 1996, “Openess and Growth: A Time-series, Cross-section Analysis for Developing Coutnries,” Journal of Development Economics, 48, 419-447. 11. Slaughter, Matthew J., 2001, “International Trade and Labor-Demand Elasticities,” Journal of International Economics, 54, 27-56._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Feenstra I Robert C. Feenstra Advanced International Trade University of California, Davis and National Bureau of Economic Research 2002 |
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> Counter arguments against Feenstra
> Counter arguments in relation to Endogenous Growth
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