The Neoclassical Growth Model Under a Constant Savings Rate

Alfonso Novales, Esther Fernández and Jesus Ruiz

Chapter 2 in Economic Growth, 2022, pp 61-110 from Springer

Abstract: Abstract We present in this chapter the first growth model, introduced almost simultaneously by R. Solow and S. Swan in two different papers published in 1956. We show that, in the absence of technological growth, the economy does not experience long-run per capita growth. In aggregate terms, growth may come from population growth and from improvements in technology. We discuss the main properties of the model. A special steady-state, the Golden Rule, is introduced. We solve the continuous and discrete time versions of the deterministic model. We perform numerical exercises on the effects of changes in structural parameters and on characterizing situations of dynamic inefficiency. Finally, we explain how to obtain numerical solutions for the stochastic, discrete time version of the Solow–Swan growth model.

Keywords: Capital stock; Physical capital; Saving rate; Golden rule; Productivity shock; Dynamic inefficiency (search for similar items in EconPapers)
Date: 2022
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Chapter: The Neoclassical Growth Model Under a Constant Savings Rate (2014)
Chapter: The Neoclassical Growth Model Under a Constant Savings Rate (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-662-63982-5_2

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DOI: 10.1007/978-3-662-63982-5_2

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