The Solow model has become the most popular framework used to understand economic growth in the long run. The model, like all other models, has strengths and weaknesses. In this discussion I want you to look at the historical perspective and the application of the model.
Robert Solow tried to, in his words, ‘improve' the Harrod-Domar model, the very first Macroeconomic growth model. Please read this two articles:
- Solow's Nobel
- Critical Survey from Cambridge Journal of Economics page 771-777.
Then please answer the following questions:
1. What is the nature of Harrod-Domar model? What is the main implications of the model on saving rate and economic growth? In addition, Solow saw two main problems of the model. What are they? Explain.
2. For the Solow Growth model, what are the main implications of the model? What is the ‘new' implications between saving rate and economic growth? How this is different from the Harrod-Domar model?
discuss the application of the Solow Model:
https://www.mruniversity.com/courses/principles-economics-macroeconomics/solow-model-economic-growth (Links to an external site.)
- Introduction of Solow Model
- Physical Capital and Diminishing Return
- The Solow Model and the Steady State
- Human Capital and Conditional Convergence
Then please answer the following questions:
3. In the videos, the speaker used the Solow model to explain the phenomena that some countries, such as Germany and Japan after the World War and China in the past two decades, can grow fast than others. What is the cause of this phenomena according to Solow model? Moreover, the speaker talked about "Conditional Convergence" or the importance of institution. What is that all about? Explain.
4. By using the Solow Model to explain what happened above, please address ONE thing why you agree with the explanation. And ONE thing why you disagree with the model or what you think the model lacks of.
After answering these 4 questions, please make at least TWO comments on your colleagues' answers. You must state, for each comment, at least ONE thing you agree and ONE thing you disagree. Then explain why. See the rubric for more details.
You don't need to do the peer review, just help me answer these questions. Thanks. And please answer these questions by your own words, no references.
Attachment:- Solows Nobel Lecture.rar