There exist several drawbacks in the Solow growth model (Solow, 1956) that does not make the model provide satisfying answers to the central questions about economic growth. Explain the key problems with the Solow growth model that led to the emergence of the endogenous growth models (e.g., productive externalities and R&D models of endogenous growth)

There exist several drawbacks in the Solow growth model (Solow, 1956) that does not make the model provide satisfying answers to the central questions about economic growth. Explain the key problems with the Solow growth model that led to the emergence of the endogenous growth models (e.g., productive externalities and R&D models of endogenous growth)

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter16: Economic Growth

Section: Chapter Questions

Problem 13E

See similar textbooks

Similar questions

The Solow Growth Model is an exogenous model of economic growth that analyzes changes in the level of output in an economy over time as a result of changes in the population growth rate, the savings rate, and the rate of technological progress. Consider the Solow model. a) Explain using a graph why there is a poverty trap in this model b)Describe how an economy such as one characterized by this model may break out of a poverty trap.
With regards to Solow-Swan Model in economics, what does exogenous growth mean and what factors can lead to growth in output according to the model?
Beyond the Solow model, how do endogenous growth theories provide greater understanding of the process of economic growth?
The economic growth model(s) of ( ) below can be recognized as an endogenous model. A Slow-Swan model; B Ricardo’s model; C Romer-Lucas model; D Harrod-Domar model; E Aghiot-Howitt model.
Consider the Swan-Solow model of economic growth. [Hint: Question (e) below goes beyond the subject matter discussed in the lecture and requires you to think independently.] It has been argued that corruption affects economic growth (e.g. Mankiw/Taylor, 5th ed., pp. 479-480). Explain which of the curves in your diagram is most plausibly affected by a reduction in corruption in an economy, and what this effect would be.
Consider the Swan-Solow model of economic growth. [Hint: Question (e) below goes beyond the subject matter discussed in the lecture and requires you to think independently.] e) It has been argued that corruption affects economic growth (e.g. Mankiw/Taylor, 5th ed., pp. 479-480). Explain which of the curves in your diagram is most plausibly affected by a reduction in corruption in an economy, and what this effect would be.f) Use your diagram to show how the effect that you have identified in part (e) affects the steady state in the model.
Evaluate the following statement. People do not save enough or invest enough in their education. What would be the arguments for and against government policies that encourage an increase in private savings and more investment in education? Using appropriate equations and graphs, consider the implications of both the Solow growth model and the endogenous growth model, but also their limitations, when addressing these questions.
In the endogenous growth model, a) the growth rate of human capital is equal to the growth rate of output. b) the growth rate of output is greater than to the growth rate of human capital. c) None of the answers are correct d) the growth rate of capital is less than the growth rate of output. e) the growth rate of human capital is greater than the growth rate of output.
The Solow model without exogenous productivity growth predicts that rich countries with more capital will grow faster than poor countries with less capital, assuming other economic conditions are equal. Is this statement true or false? Explain.
Which of the following is an incorrect statement about the variable ‘s’ in the Solow Growth Model? a.s is the fraction of income that is saved b.s is an exogenous factor c.s is referred to as saving per worker d.s determines how income is allocated between consumption and investment
Consider the following numerical examples for the Solow Growth Model: Economy A z=1 s=0.5 F(K,N)=K0.3N0.7 n=0.01 d=0.1 Economy B z=1 s=0.2 F(K,N)=K0.3N0.7 n=0.01 d=0.1 In which economy is GDP per capita higher in steady state? O Economy A O Economy B O Not enough Information
Question 4:a. Identify two assumptions of the basic Solow Growth Model. b. Why are these assumptions important in supporting the Solow Model? c. You are given the following information about an economy.Y = C + IY = F(K, L)The aggregate production function for this economy exhibits constant returns to scale and the marginal products of labor and capital are both subject to diminishing returns.s = saving rate (assume this is constant) per yearδ= depreciation rate (assume this is a constant) per yeary = Y/Lk = K/Lk* = steady state of capital per worker (K/L) and sf(k) < δk.i. What is sf(k)? ii. What is δk?iii. Interpret the meaning of sf(k) < δk? iv. Graphically illustrate sf(k), δk, and k*. Indicate on your graph where sf(k) < δk.v. Explain what happens in this economy when sf(k) < δk.