Endogenous growth theory

A family of economic theories in which forces within the economy—especially innovation, knowledge, and human-capital accumulation—drive sustained long-run growth.

Romer model: A growth model in which profit-seeking firms produce new designs, and knowledge spillovers support continuing technological progress. It formalizes how research and nonrival knowledge can generate sustained growth.
Solow–Swan model: A neoclassical growth model in which capital accumulation faces diminishing returns and long-run per-capita growth depends on exogenous technological progress. Endogenous growth models respond to its treatment of technological progress as external to the economy.
Paul Romer: An American economist whose research helped establish modern endogenous growth theory through models of ideas and innovation. His work made knowledge creation a central explanation of long-run growth.
Innovation policy: Government measures intended to influence the creation, adoption, and diffusion of new products and processes. Endogenous models explain why policy may affect the rate of technological progress.
Exogenous growth model: A growth model that treats the long-run rate of technological progress as determined outside the economy. It differs directly by taking the source of sustained productivity growth as given.
Lucas–Uzawa model: A growth model in which time spent acquiring skills raises human capital and can sustain per-capita growth. It makes human-capital accumulation the engine of persistent growth.
Diminishing returns: The tendency for each additional unit of an input to add less output when other inputs are held constant. Overcoming diminishing returns to reproducible inputs is central to sustaining growth in these theories.
Robert Lucas Jr.: An American economist whose research on human capital and growth helped shape modern macroeconomics. His 1988 growth model put skill accumulation at the center of sustained growth.
Patent: A time-limited legal right that lets an inventor exclude others from making or using a claimed invention. Temporary exclusivity can reward research while limiting the spread of knowledge.
Neoclassical growth model: A model of output and capital accumulation in which factor substitution and diminishing returns shape long-run outcomes. Its standard form leaves technological progress outside the model’s economic decisions.

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