1. Most of the economic literature on technical progress either treats it as an exogenous variable, often as a stochastic shocks or without specifying the origin of technological progress.

  2. On the other hand, it is a commonly repeated belief that the free market system could encourage technical innovations through investment, however, I do not know of any relevant academic work that dares to say that technical progress responds to a large extent to economic factors, much less presents an endogenous model of technology.

Of course, this could be due to the fact that I am not a specialist in the subject, so I would like to know if anyone could mention any work that tries to explain technical progress fundamentally based on economic factors.


2 Answers 2


As the other answer says there is whole literature on the subject. In fact this is not even new subject, in 2018 Romer was awarded Nobel Prize in economics precisely for his work on endogenous growth.

The first exploration into this topic was done already by Arrow (1962) who developed mode of learning by doing. In such model, the more longer some company focuses on some field it becomes more productive. This makes growth endogenous.

Another very famous contribution is the Romer Model. In Romer (1990) model the growth depends on R&D which is undertaken by profit maximizing firms.

The above are just some examples. The literature on endogenous growth is extremely wide. See Romer Advanced Macroeconomics ch 3 or Acemoglu Introduction to modern economic growth for more examples.

  • $\begingroup$ I am not exactly looking for an endogenous model in which technology influences, but rather how the economic environment affects the technological level (i.e., the causality I am looking for goes in the opposite direction to that of growth models). $\endgroup$
    – Davius
    Commented Jun 24, 2022 at 23:17
  • 1
    $\begingroup$ @Davius 1. by definition endogeneity means there is 2 way causality 2. In the models above there is always causality from economic conditions to technology so what you say you are looking for $\endgroup$
    – 1muflon1
    Commented Jun 24, 2022 at 23:36

The whole endogenous technological change literature, a.k.a endogenous growth models, is about how various market factors affect entrepreneurs or the R&D sector conducting technological innovations.


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