Solow Growth Model - Essay Example

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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 ...Show more

Summary

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
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