Robert Solow developed the neo-classical theory of economic growth and Solow won the Nobel Prize in Economics in 1987. He has made a huge contribution to our understanding of the factors that determine the rate of economic growth for different countries.
Growth comes from adding more capital and labour inputs and also from ideas and new technology.
| Jim Kim on Foundations for Sustained Growth |
“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
What are the basic points about the Solow Economic Growth Model?
The neo-classical model treats productivity improvements as an 'exogenous' variable – they are assumed to be independent of the amount of capital investment.
Catch up growth
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