Simplified Version of the Endogenous Growth Model of Romer (1990)

In this video, I present a highly simplified version of the endogenous growth model of Romer (1990). This version abstracts from many of the complications of the full model but nevertheless preserves crucial insights. I derive the endogenous long-run balanced growth rate and discuss how it depends on parameters and governmental policies. Finally, I discuss the strong scale effect that is implied by the model and its empirical validity.

For a more complex three-sector version of the model that contains the dynamic consumption-saving choice of households and the monopolistic competition structure in the intermediate goods sector, please see:

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[anugrahabasanth]

The video was really helpful. Thank you Sir for explaining the model in such a simple manner.