What Is the Classical Growth Theory?

Solow Growth Model, a well-known model of development economics proposed by Robert Solow, also known as neoclassical economic growth model, exogenous economic growth model, is within the framework of neoclassical economics Economic growth model.

Neoclassical growth theory

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1. This model assumes that all savings are converted into investment, that is, the savings-investment conversion rate is assumed to be 1;

2. The model assumes investment

Y (t) = F (K (t), A (t) L (t))

1. main conclusion

(1) From any point, the economic direction

New-Classical Theory of Economic Growth

Neoclassical growth theory mainly refers to American economists

The Solow model developed the Harold-Domar model by introducing market mechanisms and changing the assumption that the capital-output ratio is constant. However, Solow still does not include technological progress as an important factor in the model. This is a major drawback because The important role of technological progress in promoting economic growth is an obvious fact in reality. In 1960, Solow and Meade supplemented the model, introducing technological progress and time factors into the original model. The revised model is called the "Solo-Mead model", and its basic formula is:

G = a K / K + 1a L / L + T / T

In the above formula, T / T represents technological progress. The Solow model and the later Solow-Mead model not only reflect Keynesianism, but also the economic thought of the neoclassical school. It is often called the neoclassical growth model. The growth theory described by this model is called neoclassical growth theory.