Value-Adding Designs and the Efficiency Augmented Solow Growth Model

Long-run welfare growth can be achieved only by using finite resources more productively within an economy, but the mechanisms that will ensure this outcome are less understood. Nevertheless, a growing consensus has emerged among growth theorists that an economy can satisfy its perpetual growth agenda by effectively controlling the means of innovation. However, prominent models of endogenous growth have failed to effectively document the process of innovation or long-run productivity growth within an economy and the drivers behind it. This paper will attempt to show that technical productivity consists of measurable components, and that growth of competitive firms’ cash reserves and the rate of knowledge spillover among them can explain the variations in long-run economic growth.