Solow model explains longrun growth from "summary" of EBOOK: Macroeconomics by Rudiger Dornbusch,Stanley Fischer,Richard Startz
The Solow model is a key element in understanding the long-run growth of an economy. It provides a framework that helps us analyze how economies grow over time. The model is named after Robert Solow, who developed it in the 1950s. At its core, the Solow model focuses on the factors that determine the long-run growth rate of an economy. These factors include capital accumulation, technological progress, and population growth. By studying how these factors interact with each other, we can gain insights into why some countries grow faster than others in the long run.
One of the key insights of the Solow model is the concept of diminishing returns to capital. As an economy accumulates more capital, the marginal productivity of capital decreases. This means that in the long run, the growth rate of an economy ...
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