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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Peter W. Howitt on Endogenous Growth - Dictionary of Arguments
Aghion I 323 Endogenous growth/creative destruction/Aghion/Howitt: the main contribution of the literature on endogenous growth pioneered by Romer (1986)(1) and Lucas (1988)(2) has been to endogenize the underlying source of sustained growth in per-capita income, namely the accumulation of knowledge. >Knowledge, >Knowledge spillover. There are many channels through which societies accumulate knowledge, including formal education, on-the-job training, basic scientific research, learning by doing, process innovations, and product innovations. >Education, >Education policy, >Inventions. This paper* examines a channel that has received little attention in the endogenous growth literature, namely that of industrial innovations which improve the quality of products. Cf. >Exogenous growth, >New growth theory. This channel introduces into endogenous growth theory the factor of obsolescence; better products render previous ones obsolete. Obsolescence exemplifies an important general characteristic of the growth process, namely that progress creates losses as well as gains. It also embodies Schumpeter's idea of creative destruction (1942(3), p. 83): Aghion I 324 „The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers' goods, the new methods of production or transportation, the new markets,.... [This process] incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.“(3) >Creative destruction/Schumpeter. Aghion/Howitt: The present paper* constructs a simple model of growth through creative destruction, by modelling the innovation process as in the patent-race literature surveyed by Tirole (1988(4), Ch. 10) and Reinganum (1989)(5). The expected growth rate of the economy depends upon the economy-wide amount of research. The paper shows that equilibrium in such an economy is determined by a forwardlooking difference equation, according to which the amount of research in any period depends upon the expected amount of research next period, similar to the difference equation that defines equilibrium in the two-period overlapping generations model of money (Azariadis (1981)(6), Grandmont (1985)(7)). >Equilibrium, >Equilibrium theory, >Inventions, >Research and Development, >Economic models, >Model theory, >Models, >Innovation/Aghion/Howitt. * Philippe Aghion and Peter Howitt. (1992). A Model of Growth Through Creative Destruction Econometrica, Vol. 60, No. 2 (Mar., 1992), pp. 323-351 1. ROMER, P. M. (1986): "Increasing Returns and Long-Run Growth," Journal of Political Economy, 94,1002-1037. 2. LUCAS, R. E. JR. (1988): "On the Mechanics of Economic Development," Journal of Monetary Economics, 22, 3-42. 3. SCHUMPETER, J. A. (1942): Capitalism, Socialism and Democracy. New York: Harper and Brothers. 4. TIROLE, J. (1988): The Theory of Industrial Organization. Cambridge, MA: M.I.T. Press. 5. REINGANUM, J. (1989): "The Timing of Innovation: Research, Development and Diffusion," in Handbook of Industrial Organization, Vol. I, ed. by R. Schmalensee and R. Willig. Amsterdam: North-Holland. 6. AZARIADIS, C. (1981): "Self-Fulfilling Prophecies," Journal of Economic Theory, 25, 380-396. 7. GRANDMONT, J.-M. (1985): "On Endogenous Competitive Business Cycles," Econometrica, 53, 995-1045._____________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. |
Howitt, Peter W. Aghion I Philippe Aghion Peter W. Howitt A Model of Growth Through Creative Destruction Econometrica, Vol. 60, No. 2 (Mar., 1992), pp. 323-351 1992 |
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