Improvement and Development of New Growth Theory

Solow neoclassical growth theory considers technological progress as exogenous, but the shortcoming is the theory doesn't reflect correctly the correlation between economic growth and technological progress. On the contrary, New Growth Theory, typically represented by Romer's RD model and Lucas's human capital model, takes account of technological progress and human capital accumulation as endogenous, but its shortcoming is to take saving rate and population growth rate as exogenous. Analysing the correlation between economic growth and saving rate and population growth rate, this paper takes saving rate and population growth rate as endogenous and analyses the law of economic growth.