Solow Model of Economic Growth

… a core concept in Macroeconomic Policy

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Concept description

Alex Tabarrok (reference below and link to right) describes the Solow model, named after Robert Solow, the 1987 winner of the Nobel Prize in Economics, as follows:

“Among other things, the Solow model helps us understand the nuances and dynamics of growth. The model also lets us distinguish between two types of growth: catching up growth and cutting edge growth. As you’ll soon see, a country can grow much faster when it’s catching up, as opposed to when it’s already growing at the cutting edge.”

In its most simplified form, the Solow model uses the production function:

Y = f (K, eL, A)

where Y = output; K = physical capital; eL = human capital (the product of education, e, and the amount of labour, L); and A = ideas.

MRU practice questions

See http://www.mruniversity.com/node/330662, accessed 23 April 2016.

  1. Japan’s and Germany’s economic growth after World War II are both examples of:

Source

Alex Tabarrok, Introduction to the Solow Model, at http://www.mruniversity.com/courses/principles-economics-macroeconomics/solow-model-economic-growth, accessed 23 April 2016.

Atlas topic and subject

Growth, Capital Accumulation, and the Financial System (core topic) in Macroeconomic Policy.

Page created by: Ian Clark, last modified on 23 April 2016.

Image: Alex Tabarrok, Introduction to the Solow Model, at http://www.mruniversity.com/courses/principles-economics-macroeconomics/solow-model-economic-growth, accessed 23 April 2016.