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The Neoclassical Growth Model Under a Constant Savings Rate

In: Economic Growth

Author

Listed:
  • Alfonso Novales

    (Complutense University of Madrid)

  • Esther Fernández

    (Complutense University of Madrid)

  • Jesús Ruiz

    (Complutense University of Madrid)

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.

Suggested Citation

  • Alfonso Novales & Esther Fernández & Jesús Ruiz, 2022. "The Neoclassical Growth Model Under a Constant Savings Rate," Springer Texts in Business and Economics, in: Economic Growth, edition 3, chapter 2, pages 61-110, Springer.
    • Handle: RePEc:spr:sptchp:978-3-662-63982-5_2
    DOI: 10.1007/978-3-662-63982-5_2
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