Complex Endogenous Growth Model and Its Applications

Robert Kitt


In this paper, social complex systems are applied to the endogenous economic growth model. It is discussed that the economic growth put forward in Romer’s endogenous growth model is not continuous, but is rather in the functional shape of the bifurcations known to the natural sciences. The author has proposed that the level of development (factor A in a classic growth model) should be the superposition of the structures of science and real economy in the observed country. The conclusion is drawn that closer correspondence between business and R&D results in (i) higher economic output for the country; and (ii) a greater resilience to external shocks. This is especially important for small open economies with distinct cultures and languages (e.g. Estonia), that should simultaneously increase its citizens well-being, but must account for exogenous economic and technological factors. It is concluded that under the assumptions of complexity, a state’s economic growth model should (i) strive for horizontally and vertically diversified risks, as well as (ii) assume that none of its society’s members is left behind in terms of education, employment, and general wellbeing.

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