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Neoclassical growth theory

In: Handbook of Macroeconomics

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  • Solow, Robert M.

Abstract

This chapter is an exposition, rather than a survey, of the one-sector neoclassical growth model. It describes how the model is constructed as a simplified description of the real side of a growing capitalist economy that happens to be free of fluctuations in aggregate demand. Once that is done, the emphasis is on the versatility of the model, in the sense that it can easily be adapted, without much complication, to allow for the analysis of important issues that are excluded from the basic model.Among the issues treated are: increasing returns to scale (but not to capital alone), human capital, renewable and non-renewable natural resources, endogenous population growth and technological progress. In each case, the purpose is to show how the model can be minimally extended to allow incorporation of something new, without making the analysis excessively complex.Toward the end, there is a brief exposition of the standard overlapping-generations model, to show how it admits qualitative behavior generally absent from the original model.The chapter concludes with brief mention of some continuing research questions within the framework of the simple model.

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This chapter was published in:

  • J. B. Taylor & M. Woodford (ed.), 1999. "Handbook of Macroeconomics," Handbook of Macroeconomics, Elsevier, edition 1, volume 1, number 1.
    This item is provided by Elsevier in its series Handbook of Macroeconomics with number 1-09.

    Handle: RePEc:eee:macchp:1-09

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    Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description

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    Cited by:
    1. Debdulal Mallick, 2007. "The Role of Elasticity of Substitution in Economic Growth: A Cross-Country Test of the La Grandville Hypothesis," Economics Series 2007_04, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
    2. Ali Khan, M. & Piazza, Adriana, 2011. "Optimal cyclicity and chaos in the 2-sector RSS model: An anything-goes construction," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 397-417.
    3. Massón-Guerra, José Luis, 2007. "Evolución de la Eficiencia Productiva de una empresa privatizada: El Caso del Grupo Telefónica de España
      [Productive Efficiency in Telefonica]
      ," MPRA Paper 13463, University Library of Munich, Germany.
    4. Colin Ellis, 2006. "Elasticities, markups and technical progress: evidence from a state-space approach," Bank of England working papers 300, Bank of England.
    5. Charles I. Jones & Dean Scrimgeour, 2004. "The Steady-State Growth Theorem: A Comment on Uzawa (1961)," NBER Working Papers 10921, National Bureau of Economic Research, Inc.
    6. Mario, Pomini, 2009. "From stability to growth in neoclassical multisector models," MPRA Paper 18995, University Library of Munich, Germany.
    7. Debdulal Mallick, 2007. "Growth and Slowdown of Nations: What Role for the Elasticity of Substitution?," Economics Series 2007_02, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
    8. Lúdvík Elíasson, 2004. "Resources Policy in an Endogenously Growing Economy," DEGIT Conference Papers c009_034, DEGIT, Dynamics, Economic Growth, and International Trade.

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