Solows model of economic growth, often known as the Solow-Swan neo-classical growth model as the model was independently discovered by Trevor W. Swan and published in The Economic Record in 1956, allows the determinants of economic growth to be separated out into increases in inputs (labour and capital) and technical progress. Using his model, Solow (1957) calculated that about four-fifths of the growth in US output per worker was attributable to technical progress. Bill Clinton awarding Solow the National Medal of Science in 1999 Solow also was the first to develop a growth model with different vintages of capital.[4] The idea behind Solows vintage capital growth model is that new capital is more valuable than old (vintage) capital because new capital is produced through known technology. Within the confines of Solows model, this known technology is assumed to be constantly improving. Consequently, the products of this technology (the new capital) are expected to be more productive as well as more valuable.[4] The idea lay dormant for some time perhaps because Dale W. Jorgenson (1966) argued that it was observationally equivalent with disembodied technological progress, as advanced earlier in Solow (1957). It was successfully pushed forward in subsequent research by Jeremy Greenwood, Zvi Hercowitz and Per Krusell (1997), who argued that the secular decline in capital goods prices could be used to measure embodied technological progress. They labeled the notion investment-specific technological progress. Solow (2001) approved. Both Paul Romer and Robert Lucas, Jr. subsequently developed alternatives to Solows neo-classical growth model.[4] Since Solows initial work in the 1950s, many more sophisticated models of economic growth have been proposed, leading to varying conclusions about the causes of economic growth. In the 1980s efforts have focused on the role of technological progress in the economy, leading to the development of endogenous growth theory (or new growth theory). Today, economists use Solows sources-of-growth accounting to estimate the separate effects on economic growth of technological change, capital, and labor.[4] Solow currently is an emeritus Institute Professor in the MIT economics department, and previously taught at Columbia University..
Posted on: Tue, 13 Jan 2015 05:46:00 +0000
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