Endogenous Growth

Growth theory is currently changing directions. The orthodox neoclassical approach is being modified and extended by models of endogenous growth. This volume provides a survey of the topic, along with fresh contributions in the field.

Growth performance differs widely among countries and, as demonstrated in this volume, the usual empirical tests of convergence of growth rates are blurred by Galton's classical fallacy of regression to the mean. More direct empirical methods show a tendency towards divergent growth rates. One of the theoretical contributions argues that divergent growth experiences are better accounted for by the new growth theory than by the old. Endogenous growth models may give rise to multiple equilibria. Economies with identical structures may therefore have different growth rates. Moreover, judging theories by simple correlations may be flawed if the shocks are not properly accounted for. This volume also shows how international coordination across countries may be needed to promote growth due to international spillover effects.

An important insight of the new theory is that economic institutions and short-term policies have long-run effects on growth. Other contributions in this volume cover aspects such as growth effects of different trade, tax and public investment policies, as well as lobbying activities. Moreover, the relationships between growth, talent and income distribution are explored from different perspectives. The emphasis is on the effects of egalitarianism both within and across generations.