Transcript of 1 Neoclassical Growth Model- the Solow-Swan Model Key papers: –Robert Solow, ‘A Contribution to...
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- 1 Neoclassical Growth Model- the Solow-Swan Model Key papers:
Robert Solow, A Contribution to the Theory of Economic Growth
Quarterly Journal of Economics (1956) and later in his book Growth
Theory (1970) Trevor Swan Economic Growth and Capital Accumulation,
Economic Record (1956)). The model starts with the relationship
between saving, investment and the change in the stock of capital
over time: Investment Depreciation at rate Savings rate
Intermediate Macroeconomics Economic Growth
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- 2 Neoclassical Growth Model- the Solow-Swan Model Divide both
sides by L: Multiply both sides by k Evolution of k ( = K/L ):
Growth of LGrowth of KGrowth of k = - Intermediate Macroeconomics
Economic Growth
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- 3 Neoclassical Growth Model- the Solow-Swan Model Through
substitution: Steady-state equilibrium Behaviour of k Intermediate
Macroeconomics Economic Growth