Semi-endogenous or fully endogenous growth? A unified theory

Abstract

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.