Economic growth: Nobel prize in economic sciences 2018 and the lessons for Russia

Abstract

The article discusses the evolution of the theory of long-run economic growth and the contribution of the 2018 Nobel prize winners Paul Romer and William Nordhaus. First, it describes the exogenous growth theory of the 1950s and 1960s, such as the Solow model, the Ramsey model, and the overlapping generations model, in which growth is determined by exogenously given technological progress. Then the paper turns to the contribution of the Nobel laureates, who were the first ones to develop the theory of endogenous growth. In the case of the Romer model, technological progress is the result of intentional actions of firms, which introduce new products and thereby raise the overall productivity. In case of the Nordhaus model, production causes environmental damage, which then stifles further growth. In both cases production causes externalities, which have either positive or negative effect on growth. Then, the article considers further developments in the theory of economic growth, such as the Schumpeterian theory , unified growth theory, and institutional theory. The paper concludes with some practical implications about policies needed to reignite the growth of the Russian economy.