Based_On_The_Solow_Model,_Analyze_Convergence_In_The_Context

Based On The Solow Model, Analyze Convergence In The Context Of Balanced Growth Path INTRODUCTION Variations in growth rates between countries has always attracts economist to study growth. The ultimate objective of studying economic growth is to determine whether there are possibilities for raising overall growth or bringing standards of living in those underdeveloped countries to those developed ones. There are instances where countries grew at rate far exceeding world’s average and also those economies that collided even after experiencing substantial growth like the one in Asia. Against this background, this essay is intended to illustrate theory of growth especially convergence in context of balanced growth using Solow growth model as the basis of analysis. It will first provide the mechanics of the model together with its critical underlying assumptions of the model. Being the starting point for almost all analyses of growth theory, it later provides an analysis of the dynamic of the model. The third part of this essay will focus on the speed on convergence in the attempt to explain variations of countries growth rate overtime. Finally, to provide conclusions where related to the model. THE SOLOW GROWTH MODEL The Solow model was developed by Nobel laurette Robert Solow (1956). In general the model ignores the temporary ups and downs of the business growth, rate, model, per, investment, output, labour, capital, balanced, path, constant, increase, above, worker, solow, function, effective, time, growing, thus, therefore, savings, production, breakeven, actual, y/l, unit, economy, converge, positive, equation, because, |