The technical change in the endogenous growth model is endogenized by
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2 marks, −0.667Economics of Growth and DevelopmentEndogenous growth and technical progressEndogenous growth: AK and R&D modelsModerateabout 1 min
IIT JAM 2022 Question 28: Endogenous growth and technical progress
Answer and worked solution
Answer: (A)
In endogenous growth models technical progress is the result of purposive investment in research and development, driven by the profit incentives firms have to innovate (typically supported by some market power).
This makes technical change a variable determined within the model rather than an exogenous residual. The answer is (A).
The trap: (D) assuming a perfectly competitive market structure.
Endogenous growth typically relies on imperfect competition to reward innovation, so assuming perfect competition (D) works against endogenizing technical change.
Endogenous growth and technical progress has come up 25 times in 6 exams since 2016.
What this question tests
This question is on Endogenous growth: AK and R&D models, part of Endogenous growth and technical progress in Economics of Growth and Development.
Models where long-run growth comes from within the model, from capital or from ideas.
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