Solow–Swan model
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The Solow–Swan model or exogenous growth model is an economic model of long-run economic growth. It attempts to explain long-run economic growth by looking at capital accumulation, labor or population growth, and increases in productivity largely driven by technological progress. At its core, it is an aggregate production function, often specified to be of Cobb–Douglas type, which enables the model "to make contact with microeconomics".[1]: 26 The model was developed independently by Robert Solow and Trevor Swan in 1956,[2][3][note 1] and superseded the Keynesian Harrod–Domar model.
Mathematically, the Solow–Swan model is a nonlinear system consisting of a single ordinary differential equation that models the evolution of the per capita stock of capital. Due to its particularly attractive mathematical characteristics, Solow–Swan proved to be a convenient starting point for various extensions. For instance, in 1965, David Cass and Tjalling Koopmans integrated Frank Ramsey's analysis of consumer optimization,[4] thereby endogenizing[5] the saving rate, to create what is now known as the Ramsey–Cass–Koopmans model.
- ^ Acemoglu, Daron (2009). "The Solow Growth Model". Introduction to Modern Economic Growth. Princeton: Princeton University Press. pp. 26–76. ISBN 978-0-691-13292-1.
- ^ Cite error: The named reference
Solow1956was invoked but never defined (see the help page). - ^ Cite error: The named reference
Swan1956was invoked but never defined (see the help page). - ^ Cass D (1965): "Optimum Growth in an Aggregative Model of Capital Accumulation, The Review of Economic Studies, 32(3):233-240, jstor.
- ^ Cass endogenizes the savings rate by explicitly modeling the consumer’s decision to consume and save. This is done by adding a household optimization problem to the Solow model. see also Giri R (undated, before 2022): Lecture 3 – Growth Model with Endogenous Savings: Ramsey-Cass-Koopmans Model. Instituto Tecnologico Autonomo de Mexico (ITAM)
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