Endogenous Growth


DEFINITION of 'Endogenous Growth'

The notion that policies, internal processes and investment capital, rather than external factors, are chiefly responsible for economic growth. The idea of endogenous growth took root in the 1980s, partly as a response to criticism of the exogenous growth theory.

BREAKING DOWN 'Endogenous Growth'

Whereas believers in exogenous growth might argue that increased productivity relies on greater external technological aptitude, proponents of endogenous growth might counter that investments in technology will ultimately lead to greater technological aptitude and, as a result, greater growth.

Those who embrace the concept of endogenous growth often point to the differences in wealth that still exist between some industrialized and non-industrialized regions, something that exogenous growth proponents would argue evens out over time. In other words, in some instances, it appears that economic growth was cultivated and sustained from within a country itself.

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