Unit 4 Macro: Economic Growth - the Solow Model
The economist Robert Solow (pictured) developed the neo-classical theory of economic growth. Solow won the Nobel Prize in Economics in 1987.
“Since 2000, nearly 30 developing countries have grown by 6 percent or more a year. Developing countries are now the engine driving the global economy, accounting for around two-thirds of global growth
There are many differences across countries but there are some common elements to countries that have grown continuously. They have stable governments that pursue prudent economic policies, provide essential infrastructure and services, and take a long-term perspective. They use the opportunities provided by global markets and they have a dynamic and competitive private sector”
Source: Jim Kim, President of World Bank, July 2012
Capital investment as a % of GDP
A ‘steady-state growth path’ is reached when output, capital and labour are all growing at the same rate, so output per worker and capital per worker are constant.
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