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Economic Growth Models - Essay Example
It is obviously true that there are many countries, not essentially different either in the degree of security which they afford to property, or in the moral and religious instruction received by the people, which yet, with nearly equal natural capabilities, make a very different progress in wealth."
Countries that at one time had similar levels of per capita income have subsequently followed very divergent patterns, with some seemingly caught in an "underdevelopment trap" or long-term stagnation, and others able to sustain high growth rates (Agnor and Montiel 1999, p.669). There was even a time when economists regarded economic growth in the long run as being essentially immune to all but technological progress (Gylfason 1999, p.1). In 1960 average real per capita incomes in Asian and African countries were roughly similar. After thirty years, income per capita had increased more than threefold while it had risen only moderately in Africa. During the past two decades alone, real output expanded more than 6% per annum in Asia in contrast to the 2.8% reached in Africa and 3.7% in Latin America (Agnor and Montiel 1999, p.669). Why is it that some countries grow faster than others Do modern approaches to economic growth have a say on this phenomenon Can the Solow-Swan economic growth model shed light into this issue
The neoclassical growth model was developed by Solow (1956) and Swan (1956). It is built upon an aggregate, constant returns to scale production function that combines labor and capital (with diminishing marginal returns) in the production of a composite good. ...