Answer to Question #283741 in Macroeconomics for ABEX

Question

33. Compare the impact of population growth rate on level of per capita income in the Solow growth model and Romer’s endogenous growth model with deliberate investment in R&D.

Answer 1

In the Solow model, an increase in the population growth rate raises the growth rate of aggregate output but has no permanent effect on the growth rate of per capita output. An increase in the population growth rate lowers the steady-state level of per capita output.

Endogenous growth theory maintains that economic growth is primarily the result of internal forces, rather than external ones. It argues that improvements in productivity can be tied directly to faster innovation and more investments in human capital from governments and private sector institutions.