Question

Discuss the Solow Growth Model and the modern growth model. In your discussion, identify the similarities and differences between the two models.

Answer 1

The Solow model is basically used up to predict economic growth in the long run. This model takes note of the various factors of Capital Accumulation, Population growth, Productivity etc. and their impact on economic growth of the country. An increase in productivity is taken up to be an indicator of technological Progress.

The Modern Growth theory depicts the Human nature which hankers after unlimited wants and desires and therby fostering unhintered economic growth and productivity. As per this theory, real GDP would keep on increasing as people hanker after more and more profits.

The similarities between the two is that both are growth oriented theories and emphasises upon development of the economy.But the factors on which growth and development depends as per the two theories are vastly different.