What is the difference between neoclassical growth theory and new growth theory when
both incorporate the factor of technological progress
Traditional neoclassical growth models, which assume exogenous and universal technological progress and diminishing returns to capital accumulation, predict convergence of countries to the same steady-state rate of growth and level of income and capital per person, with initially poor countries catching up but not overtaking the leaders. For instance, they can readily provide a rationale for why Britain's lead in the 19th century would have been whittled down over time, but offer no direct way of addressing why Britain actually fell behind.
By contrast, endogenous growth models, in which productivity growth is the outcome of incentive structures that may
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