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The Solow Model suggests that economic growth is the result of an increase in the technical...

The Solow Model suggests that economic growth is the result of an increase in the technical efficiency of capital (A). Explain how 3 different institutional changes enabled an increase or a decrease in the productive efficiency of capital.

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Answer #1

Economic growth is constant and majorly induced by technological advancement as a result of capital efficiency is established by the Solow model. However, it is not just technology bt its relationship with other factors like skills, political structure , organizations and institutions which are responsible for economic growth. There are institutional changes which enable productive efficiency; adoption of new technology which is capital intensive, restructuring business firms to employ more capital and increasing skilled labor so that it doesnot result in unemployment. Increase in skills provided to the workforce will improve per unit efficiency of capital.

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