Economic Growth - Solow Growth Model and Beyond Essay

Economic Growth - Solow Growth Model and Beyond - Essay ExampleAt the core of this model, it is a neoclassical aggregate production function that in most cases is similar to Cobb Douglas model and this makes it possible for this model to be in contact with microeconomics. This model was set up by Robert Solow and Trevor Swan in the year 1956 (Dimand and Spencer, 2008). Dimand and Spencer (2008) say that the version of Solows Growth model where savings are chosen optimally by emolument maximization of the households is known as the Neoclassical Growth Model. The neoclassical model was an extension of Harrod Domar model that was developed in 1946. It superseded Harrod Domar model due to the characteristic numerical attractiveness. In that sense, the model was a convenient start point for various extensions (Hendrik and Lewer, 2015).David Cass developed a solution for the growth model in 1965 with technological dislodge and the growth in population (Jones, 1997). Jones (1997) obs erved that Solow and Swan did an extension of Harrod - Domar model, first, by the addition of labor as a factor of production. Secondly, they ensured that the capital labor ratios were non in a fixed position like in HarrodDomar models case. In a study carried out by Jones he know the modification that provided for a continual increase in capital intensity which could be distinguished from progress in technology (Jones, 1997). In this sense, they independently simplified the growth model. Solows model fitted the economic growth data that was available with some level of success. In the present day, his model is used by economists in the estimation of the separate effects on the economic growth of capital, labor as well as the technological change. The previous models that include the closed deliverance and small open economy models give a static observation of the economy at a given point in time. The Solow growth model allows us a dynamic view of how savings affects the econom y over time. The