Original Solow growth model

In 1956 Robert Solow
proposed an economic model that attempts
to explain long-run economic growth by looking at physical capital accumulation, exogenous population
growth and exogenous technological progress. It predicts that countries
reach different steady states. The higher the saving rate and the lower the
population growth rate, the richer a country is. 

Best services for writing your paper according to Trustpilot

Premium Partner
From $18.00 per page
4,8 / 5
4,80
Writers Experience
4,80
Delivery
4,90
Support
4,70
Price
Recommended Service
From $13.90 per page
4,6 / 5
4,70
Writers Experience
4,70
Delivery
4,60
Support
4,60
Price
From $20.00 per page
4,5 / 5
4,80
Writers Experience
4,50
Delivery
4,40
Support
4,10
Price
* All Partners were chosen among 50+ writing services by our Customer Satisfaction Team

The underlying assumptions
of this model are: decreasing returns to K, positive diminishing marginal
products, constant returns to scale and the Inada condition. The model is based on a ?obb-Douglas production function (Y) with
two inputs, physical capital (K) and labour (L), while also considering the
level of technology (A):

 Yt=Kta(AtLt)1-a

 

Where a is capital’s
share of income, 0 0.33; for
intermediate countries a = 0.59 ± 0.02 > 0.33; for OECD countries a = 0.36 ± 0.15 » 0.33. Therefore, original Solow
growth model is mostly incorrect. a
is…