Edogenous growth : analytical review of its generating mechanisms

This paper consists of an analytical review of the most relevant endogenous growth models. The objective of this literature review is to discuss analytically and understand, in an integrated form, the main mechanisms, identified in the existing literature, that generate endogenous growth. Endogenous or new growth theory has, so far, produced three main types of mechanisms through which endogenous sustained positive economic growth is made possible. One strategy brings a theory of innovations or R&D into the growth model. In this type of model, endogenously determined technological progress is the engine of economic growth. The second mechanism delivers sustained positive growth through the introduction of an endogenously determined accumulation of human capital. In this kind of model, the source of long-run per-capita growth is human capital accumulation. And a third way to obtain endogenous growth is simply to abandon one of the standard assumptions of the neoclassical model, more precisely the assumption of diminishing returns to capital.I wish to thank Sayantan Ghosal for his encouragement, involvement and intellectual stimulation and Marcus Miller for his insightful comments. I am also grateful to Paul Romer. Financial support from Universidade do Minho- Portugal and Fundação Ciência e Tecnologia-Portugal are gratefully acknowledged. The usual disclaimer applies