In the Lucas (1988) endogenous growth model, long-run growth is driven by:

Robert Lucas's endogenous growth model emphasises human capital accumulation as a fundamental source of sustained economic growth. A simplified production relationship can be represented as: Y = Kᵅ (u × h × L)¹⁻ᵅ × hₐᵞ where: Y = Output K = Physical capital L = Labour h = Individual human capital u = Fraction of time devoted to production hₐ = Average human capital in the economy The remaining fraction of time can be devoted to education, training and learning, thereby increasing human capital. An important feature of the Lucas model is the presence of positive externalities from average human capital. As individuals become more educated and skilled, their knowledge can improve the productivity of other individuals as well. Thus, sustained long-run economic growth can emerge endogenously through continuous human capital accumulation.