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Semi-Endogenous or Fully Endogenous Growth? A Unified Theory.

Cozzi, Guido (2023): Semi-Endogenous or Fully Endogenous Growth? A Unified Theory.

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Is growth ultimately fully endogenous or semi-endogenous? Three decades of theoretical and empirical growth economics have kept both possibilities open. Here, R & D-driven growth is a general combination of both semi-endogenous and fully endogenous mechanisms. I demonstrate that if the semi-endogenous growth component is indispensable to the actual growth mechanism, the long-run growth rate follows the semi-endogenous growth predictions. Conversely, if the semi-endogenous growth is non-essential and the world population experiences slow growth, the fully endogenous growth mechanism could dictate the long run, even if it is not essential. If no other (third) growth mechanism exists, a criterion sufficient to ascertain the essentiality of semi-endogenous growth is that reduced research consistently leads to fewer innovations. If an unknown third growth engine exists, the steady state remains semi-endogenous, provided the essentiality criterion is met. Regardless of how this third factor impacts short-term growth, semi-endogenous growth will prevail in the long run.

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