What are the different models of economic growth?
While there are many different models of economic growth, theory of classical growth, model of neoclassical growth, endogenous growth theory and the theory of unified growth in this area have contributed significantly. Economists use different economic growth models to show how uneconomical variables affect, how the economy grows to understand why some companies are growing faster than others. Critical uneconomical variables include the accumulation of individual capital in society, the flow of invention or innovation and the growth of the population. It also explains that agriculture plays an important role in the growth of any economy. They argue that economic growth will end up with the increase in the population and its resources will be reduced. The theory was developed by David Humam Smith and other physiocrats to face mercantilism. They believed to play a key role in economic growth, while focusing on the city industry can cause it to be at a long -term disadvantage.
The neoclassical growth model, also referred to as the SOLOW growth model for its developer, Robert Solow, differs from other economic growth models in that it consists of several equations that show how output, investment goods, working time and investments are interacting. This model is based on the assumption that the country uses its resources efficiently and, as the work increases, its revenues are decreasing. The model shows that technology is an important factor in growth, and as technology improves, capital increases are increasing, Earth increases and then experiences overall economic growth.
The theory of endogenous growth has improved on the model of neoclassical growth by adding the concept of human capital and mathematical explanations of technology. The biggest difference between the two models of economic growth is that endogenous growth theory claims that economies do not reach stability because economies achieve constant return to capital. Also claims that mIra's economic growth depends on whether the country invests in technological or human capital.
The theory of unified growth was created to solve the weakness of endogenic theory of growth qualitatively by explanation of various long -term observed similarities of the growth process in various stages of development. Unlike other economic growth models, this model reveals variables that are responsible for converting the economy from stagnation to growth, which contributes to understanding global differences in economic development. This theory can be used to break up the income per inhabitants in the last two centuries.