endogenous growth theory

economics

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July 16, 2026

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Endogenous growth theory is an economic concept that explains technical change as a result of profit-motivated research and development (R&D) by private firms. Unlike earlier models that viewed growth as external, endogenous theory emphasizes growth originating from within the economic system. This approach gained popularity as it suggested governments could foster economic growth through national innovation policies aimed at increasing R&D spending. The theory attempts to explain why some countries grow faster than others by focusing on internal factors driving innovation and technological advancement.1234

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economics
Growth and development
…the 1990s was labeled “endogenous growth theory” because it attempted to explain technical change as the result of profit-motivated research and development (R&D) expenditure by private firms. This was driven by competition along the lines of what Schumpeter called product innovations (as distinct from process innovations). In contrast to…
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…the 1990s was labeled “endogenous growth theory” because it attempted to explain technical change as the result of profit-motivated research and development (R&D) expenditure by private firms. This was driven by competition along the lines of what Schumpeter called product innovations (as distinct from process innovations). In contrast to…
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Paul Romer
The contemporary economic field of endogenous growth theory, which studies the production of technological ideas and its relation to economic growth, is based on Romer’s groundbreaking work.
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The contemporary economic field of endogenous growth theory, which studies the production of technological ideas and its relation to economic growth, is based on Romer’s groundbreaking work.
Read More