ABSTRACT
The situation changed dramatically in the mid-1980s, when growth economics started to boom again, following the lead of Paul Romer and Robert Lucas. A formidable industry of theoretical and empirical research on economic growth sprang up like a mushroom. Also described as ‘new’ growth theory (NGT) to indicate the claim to originality, some advocates were quite explicit in their view that NGT will revolutionize the way economists think about certain problems (see Grossman and Helpman, 1994, p. 42). The emphasis is on ‘endogenous’ mechanisms generating economic growth, that is, long-term growth is determined ‘within the model, rather than by some exogenously growing variables like unexplained technological progress’ (Barro and Sala-i-Martin, 1995, p. 38). This is considered the main distinguishing feature between NGT and old, Solovian, growth theory.
