Definition of New Growth Theory

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New growth theory studies economic growth. Called 'new' because unlike previous attempts to model the phenomenon, the new theories treat knowledge as at least partly endogenous. R&D is one path. Hulten (2000) says that the new growth theories have the new assumption that the marginal product of capital is constant rather than in diminishing as in the neoclassical theories of growth. Capital often in the new growth models includes investments in knowledge, research and development of products, and human capital.‚Äč

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