The larger returns on investment in less industrialised countries, (assuming constant returns to
scale), should generate convergence between less-industrialised and industrialised
countries. However, exogenous technology improvements shift the output, pushing
forward the steady state. Romer (1986) with his “endogenous growth model”,
questioned the idea of technology shifts as exogenous to the economic system,
highlighting how investment and human activities in general have positive “spillover”
effects on knowledge.
The larger returns on investment in less industrialised countries, (assuming constant returns toscale), should generate convergence between less-industrialised and industrialisedcountries. However, exogenous technology improvements shift the output, pushingforward the steady state. Romer (1986) with his “endogenous growth model”,questioned the idea of technology shifts as exogenous to the economic system,highlighting how investment and human activities in general have positive “spillover”effects on knowledge.
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