Understanding Endogenicity in Economics

Endogenicity refers to the origin or cause of a particular phenomenon or condition. In economics, endogenicity is used to describe variables that are produced within a model or system, rather than being exogenously determined, or determined outside of the model.

In other words, endogenicity implies that the variable being studied is determined by factors internal to the system or model, rather than being influenced by external factors. For example, in a model of economic growth, endogenous variables might include factors such as technological progress, population growth, and investment, which are determined within the model itself, rather than being exogenously determined by external factors such as government policies or global events.

Endogenicity is an important concept in economics because it allows researchers to understand how the internal workings of a system or model can influence the behavior of the variables being studied. By examining the endogenous factors that drive economic phenomena, researchers can gain insights into the underlying mechanisms that shape economic outcomes, and can use this knowledge to develop more effective policies and interventions.