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    The Solow Growth Model

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    Red Mercado Soriano
    The document discusses Robert Solow's growth model, which examines US economic growth from 1909-1949. It found that 80% of growth in inputs per labor hour was due to technical progress, while overall GDP growth of 2.9% annually was attributed to capital accumulation (0.32%), increased labor inputs (1.09%), and technical progress (1.49%). The Solow growth model identifies these three factors - technical progress, labor supply, and capital accumulation - as the main determinants of GDP growth. It also outlines some of the model's assumptions and implications for short-run and long-run growth.

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    The Solow Growth Model

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    Red Mercado Soriano
    18 views7 pages
    The document discusses Robert Solow's growth model, which examines US economic growth from 1909-1949. It found that 80% of growth in inputs per labor hour was due to technical progress, while overall GDP growth of 2.9% annually was attributed to capital accumulation (0.32%), increased labor inputs (1.09%), and technical progress (1.49%). The Solow growth model identifies these three factors - technical progress, labor supply, and capital accumulation - as the main determinants of GDP growth. It also outlines some of the model's assumptions and implications for short-run and long-run growth.

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    The Solow Growth Model

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    The document discusses Robert Solow's growth model, which examines US economic growth from 1909-1949. It found that 80% of growth in inputs per labor hour was due to technical progress, while overall GDP growth of 2.9% annually was attributed to capital accumulation (0.32%), increased labor inputs (1.09%), and technical progress (1.49%). The Solow growth model identifies these three factors - technical progress, labor supply, and capital accumulation - as the main determinants of GDP growth. It also outlines some of the model's assumptions and implications for short-run and long-run growth.

    Copyright:

    © All Rights Reserved
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    18 views7 pages

    The Solow Growth Model

    Uploaded by

    Red Mercado Soriano
    The document discusses Robert Solow's growth model, which examines US economic growth from 1909-1949. It found that 80% of growth in inputs per labor hour was due to technical progress, while overall GDP growth of 2.9% annually was attributed to capital accumulation (0.32%), increased labor inputs (1.09%), and technical progress (1.49%). The Solow growth model identifies these three factors - technical progress, labor supply, and capital accumulation - as the main determinants of GDP growth. It also outlines some of the model's assumptions and implications for short-run and long-run growth.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    THE SOLOW GROWTH

    MODEL
    MACROECONOMICS
    SORIANO, RED M.

    ROBERT SOLOW
    Nobel Prize winner
    in Economics
    Solow Growth
    Model
    Focuses on
    physical capital
    per worker
    Uses physical
    capital to
    determine growth

    He examined:
    1909- 1949 US Economic Growth
    80% growth in input per labor hour was
    due to Technical Progress
    US GDP Growth was due to Capital and
    Labor Growth along with Technical
    Progress
    Between 1909 and 1949, average annual
    growth of total GDP was 2.9% per year
    where:
    .32% Capital Accumulation
    1.09% Increase Labor Input
    1.49% Technical Progress

    3 Important Determinants of
    GDP Growth
    Technical Progress
    Increased Labor Supply
    Capital Accumulation

    Assumptions
    In order to make the Solow Model
    works, we must assume several things:
    Quantity of Labor Inputs is the same
    overtime
    Production Function does not change
    Diminishing returns
    Technological Improvement is necessary

    Short-Run Implications
    Policy measures can affect SteadyState not long-run national curve
    Growth affected only in short-run
    Growth rate determined by capital
    accumulation
    Capital Accumulation is determined by
    saving rate and depreciation

    Long-Run Implications
    Long-run rate of growth is exogenous
    Economy always converges to steadystate
    Country with higher saving rate will
    have faster growth

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