In neoclassical growth models, the sources of growth - technological advancement - is exogenous. Therefore, such models describe how an economy grows, but not why it grows.

To overcome this shortcoming, several growth models have been developed to make growth endogenous. In contrast to neoclassical growth theory, endogenous growth theory argues that policy measures (such as subsidies on R&D and education, for example) can have a long-run positive impact on the economy and its growth rate.

Assignment Instructions:

discuss the similarities and the differences between the exogenous and endogenous growth theories, and their impact on long-run economic growth.