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Solow growth model - extended
Write a 500 word essay on how the Solow model informs us on the role of productivity in explaining cross-country differences.
Discuss the related idea of the public nature of technological capability and what that means for cross-country differences in productivity.
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The Solow model of economic growth is a model that explains the long run economic growth of a country set within the framework of neo-classical economics. The main idea of the Solow growth model is to study the long run economy by considering the capital accumulation, labour, population and productivity. The Solow model says that there no prices because the real requirement is output which is the real income.
The Solow model of economic growth takes into account a number of factors and gives out a result based on number of assumptions. When the Solow model of economic growth is looked upon as a cross country difference model.
It predicts that in cases of steady output per person, the cross country differences are a result of international differences in technology such that the capital output ratio is constant for international differences in steady state capital intensities.