Endogenous Technical Change in Alternative Theories of Growth and Distribution

Abstract

This paper surveys the last two and a half decades of non-neoclassical literature on endogenous technical change and the factor distribution of income. The implications of classical-Marxian and post-Keynesian contributions are compared with neoclassical exogenous and endogenous growth theories. We find the comparison illuminating in several respects: despite the strong differences in the assumptions regarding the substitutability between capital and labor, the role of different classes in society, and whether or not productive factors are fully employed, the various alternative models can be classified in a way that highlights remarkable similarities with their neoclassical counterparts. Both neoclassical and alternative theories of endogenous growth: (i) have shown that long-run growth is sensitive to investment decisions; (ii) rely on a linear spillover from the stock of knowledge to the production of innovations, and (iii) match the Kaldor facts in the long run. The comparison allows to evaluate competing theories by looking at the different channels they emphasize: saving behavior and market structure in the neoclassical theories, as opposed to income distribution, the state of the labor market, and investors' behavior in alternative theories.

Uneven Development and the Balance of Payments Constrained Model: Terms of Trade, Economic Cycles, and Productivity Catching-up.

“…The introduction of endogenous technical change into the context of distributive models was initially done by Shah and Desai (1981) , and further elaborated by Van der Ploeg (1987) , Foley (2003) , and Tavani & Zamparelli (2017) . Specially in what concerns the literature on evolutionary economics, the distributive cycle model is the starting point for an investigation on the dynamics of innovation creation and diffusion in Englmann (1994) , Fatás-Villafranca, Jarne, & Sánchez-Chóliz(2012) , and Dosi, Sodini, & Virgillito (2015 .…”

Classical Political Economy and Secular Stagnation

“…which is similar to the baseline model: this is the reason why models incorporating a Verdoorn effect have been referred to as semi-endogenous, in that the corresponding part of the long run growth rate is determined within the model but policy-invariant (Tavani and Zamparelli, 2017). However, (i) the effect of a shock to the labor market parameter z will actually be amplified by the presence of the Verdoorn parameter 𝜃; (ii) employment becomes more likely to be wageled in the long run: equation ( 15) modifies as follows:…”

Human Capital, Economic Growth and Poverty Reduction Nexus: Why Investment in Free Compulsory Universal Education Matters for Africa

“…The theory of endogenous growth, propounded by Romer (1984), provides a theoretical framework that emphasises economic growth as an endogenous outcome of an economic system, and not the result of forces like technological change that impinge from outside. Romer argues that a country with a greater accumulation of human capital has higher rates of economic growth (Roufagalas & Orlov, 2020;Tavani & Zamparelli 2017). The theory of endogenous growth has a neoliberalist perspective that investment in education is fundamental to economic growth, correlating to improve standards of living (Bonal, 2016;Gjorgjioska, 2019;Jensen, 2012).…”

“…Human capital encapsulates the acquired skill set, abilities and knowledge possessed by individual workers. According to Tavani and Zamparelli (2017), endogenous growth theory elevates knowledge or skills as a crucial economic variable as it drives inventions, discoveries and innovation that make other factors of production more effective. Baudino (2016), therefore, opined that investments in human capital have more lasting spillover effects on improved technology and economic output than investment in physical capital.…”