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The Solow–Swan model or exogenous growth model is an economic model of long-run economic growth. It attempts to explain long-run economic growth by looking at capital accumulation , labor or population growth , and increases in productivity largely driven by technological progress.
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 ...
In the Solow growth model, a steady state savings rate of 100% implies that all income is going to investment capital for future production, implying a steady state consumption level of zero. A savings rate of 0% implies that no new investment capital is being created, so that the capital stock depreciates without replacement.
Uzawa's theorem, also known as the steady-state growth theorem, is a theorem in economic growth that identifies the necessary functional form of technological change for achieving a balanced growth path in the Solow–Swan and Ramsey–Cass–Koopmans growth models. It was proved by Japanese economist Hirofumi Uzawa in 1961. [1]
The Ramsey-Cass-Koopmans model does not have dynamic efficiency problems because agents discount the future at some rate β which is less than 1, and their savings rate is endogenous. The Diamond growth model is not necessarily dynamically efficient because of the overlapping generation setup. In a competitive equilibrium, the growth rate may ...
The Solow growth model is a model of economic development into which the Solow residual can be added exogenously to allow predictions of GDP growth at differing levels of productivity growth. The Balassa–Samuelson effect describes the effect of variable Solow residuals: it assumes that mass-produced traded goods have a higher residual than ...
A macroeconomic model is an analytical tool designed to describe the operation of the problems of economy of a country or a region. These models are usually designed to examine the comparative statics and dynamics of aggregate quantities such as the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the level of prices.
Growth model can refer to: Population dynamics in demography; Economic growth; Solow–Swan model in macroeconomics; Fei-Ranis model of economic growth;