StudentShare solutions
Triangle menu

Solow Growth Model - Essay Example

Not dowloaded yet

Extract of sample
Solow Growth Model

The second assumption was that if you hold technological progress and D/L is going down as we deplete the resources in a country, K/L may be going up because of capital accumulation, if capital accumulation was allowed to take place in an economy its possible for Y/L to remain constant or even increase and this will lead to economic growth.
If the population remains to grow in the Malthusian version, the Malthusian version is what Malthus discussed what would result from high population, he argued that in the case where population was left to grow without any control measures then this would result to a complete depletion of resources, therefore if the population grows according to the Malthusian version then this dictates that Y/L will eventually approach zero. However if we hold population constant and allow K/L to increase without a limit then Y/L will increase.
If technological progress occurs in an economy such that c is not equal to zero then for any value of c its possible to calculate a growth rate of L that is consistent with Y/L remaining positive, therefore technological progress can compensate for pop...
However if we hold population constant and allow K/L to increase without a limit then Y/L will increase.
If technological progress occurs in an economy such that c is not equal to zero then for any value of c its possible to calculate a growth rate of L that is consistent with Y/L remaining positive, therefore technological progress can compensate for population growth.
Therefore according to Solow the factors that facilitate population growth include capital accumulation and technological progress, this are the factors that determine whether per capita income grows, decline or remain constant. (Scott (1989))
Shortcomings of the Solows model:
The Cobb Douglas function he uses assumes constant returns to scale; also his model assumes that there exists constant elasticity of substitution among the factors of production used in the production process, this assumption allows the standard of living and economic growth to be maintained even if D/L approaches zero as long as K/L rises appropriately.
He also assumes that every generation no matter the distance have similar opportunities with the current one, this is not consistent with human behaviour, and people today only care about their immediate gratification and not for generations to come.

Other theories of economic growth:

The classical school of economist which included Adam Smith, David Ricardo, Thomas Mathus and John Stuart Mill considered the main factors of production which included land, capital and labour but in the absence of technological advancement, they however recognised the role of capital accumulation in economic development and ...Show more


Robert Solow used the Cobb Douglas function of production to show that economic growth can still be achieved even if an economy uses exhaustible resources in its production process. He emphasised the importance of capital accumulation and the adoption of modern technology to achieve economic growth, He expressed the aggregate production function as Y =F (L, K, E, D)
Author : jimmymann
Solow Growth Model essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Solow Growth Model"
with a personal 20% discount.
Grab the best paper

Related Essays

Macroeconomic Convergence, Development And Growth
The process in which the per capita income of the poor economies tends to grow as fast as that of the rich economies is defined as the convergence. The process eventually leads the per capita incomes to converge. As the developing countries have the advantage of diminishing returns to factors, they can converge faster than the developed economies (Alfaro et al, 2005).
11 pages (2750 words) Essay
Golden Rule of Capital Accumulation and Macroeconomic Policy
This is the neo-classical model of economic growth. In 1946, Robert Solow and T. W. Swan independently developed this exogenous growth model. This steady state rate of growth is consistent with the economy’s natural rate of output. Policymakers use this model to understand why different countries grow at different rates and this is the main relevance of this model.
6 pages (1500 words) Essay
Solow Growth Model
7). Economic growth leads to better living standards for the population and higher rates of employment. There are different theories that are used to explain economic growth which include classical growth theory, neoclassical growth models, endogenous growth theory and the Salter Model.
6 pages (1500 words) Essay
Sports and Entertainment Management
Institution Student Name Date Macro and Microeconomics Introduction Unemployment is a fundamental macroeconomic issue affecting various countries across the world. The most affected countries by unemployment problem are the developing countries but the developed countries like the United States also face a significant aspect of unemployment as an economic problem.
3 pages (750 words) Essay
Macroeconomics. The Solow model
n represents growth in the labour force and as the growth takes place k=K/L here a clear case of decline is seen as L increases. This also implies that y=Y/L as L again increases. "Thus, as Lgrows, the change in k is now: where n*k represents the decrease in the capital stock per unit of labor from having more labor.
4 pages (1000 words) Essay
Solow Economic Model
The varying capital output and capital labor ratios allow increased capital intensity, well distinguished from technological innovation. The Solow model neglects the temporary slides of the business cycle and predicts the potential income on long-term basis.
6 pages (1500 words) Essay
Japans High Speed Growth Model
This turnaround is termed as a remarkable event in the modern day economic history. To understand the high speed growth which took place after the war was over, we should first understand its development and history of Japan during 18th and 19th century. During this time Japan relied on agricultural technology which it developed.
6 pages (1500 words) Essay
Economic Growth and Economic Fluctuations
These theories include the exogenous growth model as well as endogenous growth model. This paper will represent an examination of the viability of several governmental initiatives aimed determining the if certain policies will facilitate economic growth whereby a developing nation is able to catch up with already developed nations and to maintain a steady-state after catch up.
12 pages (3000 words) Essay
Japans High Speed Growth Model and Extent Vietnam Followed the Model
To understand the post-war economic miracle, of Japan, in the economic terminology, we will bring the concept of neo-classical theory of economic convergence. This economic model concept brings out the reality of the Japan’s post-war economic miracle.
6 pages (1500 words) Essay
Economic Growth - Solow Growth Model and Beyond
The factor accumulation entails the accumulation of capital, labor, as well as the population growth while the productivity factor entails progress in technology
7 pages (1750 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation