The Solow Growth Model By Robert Solow

1705 WordsNov 9, 20157 Pages
The Solow growth model was created by Robert Solow and was introduced to show how factors of production and advances in technology effect the nation’s total output. The model is made up of two components being the production and investment functions. This essay will discuss the possible effects, aspects and traits that an increase in population will have on the steady-state of the Solow growth model. This analysis will be followed by the effects of population growth on the growth rates in the model also. Paul Romer’s ideas that he has introduced to improve the Solow growth model alongside additional general elements will round the discussion to reach a conclusion involving the three elements of overall growth, limitations and Paul Romer’s ideas. In order to understand the Solow growth model, we must first explain economic growth. Economic growth is the increase in output of an economy, usually measured by the annual growth in GDP per capita Burda, Wyplosz (2013). Higher rates of economic growth facilitate the prospect to have more of one thing without having to limit something else, for example the government can initiate higher health spending and welfare benefits as well as having high consumption of private goods and services. Low rates of economic growth can lead to economies having a difficult time allocating limited resources efficiently. Therefore, there is a trade off between factors in the economy for example, spending more on healthcare could lead to less money
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