Abstract

In this article we investigate the theoretical shortcomings of traditional
neoclassical growth models and how the new literature of endogenous growth has emerged
to overcome these shortcomings. We study the theoretical reasons for hypothesis in the
traditional models – some of them necessary for the existence of equilibrium – that implied
counter-factual empirical results, like convergence. We will investigate how these hypotheses
were relaxed or substituted, up to a point where the new literature ends up working with
increasing returns and monopolist competition models of Schumpeterian inspiration that
deliver sustained growth and creative destruction.

JEL Classification: O41; O11.