growth-theoryThere are various theoretical models for economic growth. The classical model, neo-classical (exogenous) Solow-Swan model, and endogenous growth model.
What are the most recent developments in the field?
The question is very broad. One may think that this is the wrong question to ask, actually, since the macro research is defined by the agenda of issues.
That being said, the frontier in academic research nowadays is defined by two main themes: a) general equilibrium models, i.e. interactions in markets via the price mechanism, b) microdata.
The exogenous growth theories (Solow-Swan, Ramsey-Cass-Koopmans) have been abandoned altogether. Apart from the fact that they can’t explain stylized facts (mainly convergence and/or divergence of countries from the GDP frontier), they lack many features that are found in the micro-level.
Endogenous growth (as pertains to the AK model, for instance) has been successful in dealing with growth and international relations, for instance. It also paved the way for the current macro literature, namely:
“Schumpeterian” growth theory. Based on ideas that encompass the imperfect competition schemes that capitalize on innovation and its rewards: an innovation that is patented gives the right to a monopoly profit. Rents generated this way are driving investment and hence constitute a primary engine for long-run growth. Head-to-head competition, barriers to entry, closed vs open technologies, investment in human capital and education - these are all themes that are both interesting and relevant for both academics and policymakers.
Since economic growth is the result of the confluence of many factors, new research concentrates on political economics as well - the effects of institutions such as law (common vs continental) and political systems (democracy, governance schemes) on economic growth.
To read: Aghion and Howitt’s book, the best non-elementary introduction to the subject – it focuses on issues and mechanisms, and it can be read by anyone, even the non-math oriented economist.
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