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In economics, the Golden Rule savings rate is the rate of savings which maximizes steady state level of the growth of consumption, [1] as for example in the Solow–Swan model.
This is the Solow–Swan model's version of the golden rule saving rate. Since α < 1 {\displaystyle {\alpha }<1} , at any time t {\displaystyle t} the marginal product of capital K ( t ) {\displaystyle K(t)} in the Solow–Swan model is inversely related to the capital/labor ratio.
At the Cowles Foundation, his research focused mainly on neoclassical growth theory, following the seminal work of Robert Solow. [citation needed] As part of his research, in 1961 Phelps published a famous paper [2] [3] on the Golden Rule savings rate, one of his major contributions to economic science
A golden rule is nothing more than a guiding principle that, if followed, can hopefully lead you to success. When it comes to financial matters, you can find many golden rules online for everything...
Nobel laureate Robert Solow, credited as the founder of the modern model of economic growth, died on Thursday at the age of 99. Through his writings in the 1950s, Solow challenged traditional ...
An economy in the Solow growth model is dynamically inefficient if the savings rate exceeds the Golden Rule savings rate.If the savings rate is greater than the Golden Rule savings rate, a decrease in savings rate will increase consumption per effective unit of labor.
His work laid groundwork for understanding how technology accounted for economic growth
In the Solow-Swan model, economic growth is driven by the accumulation of physical capital until this optimum level of capital per worker, which is the "steady state" is reached, where output, consumption and capital are constant. The model predicts more rapid growth when the level of physical capital per capita is low, something often referred ...