Answer to Question #218241 in Economics for lena

Question

Discuss the Solow Growth Model under the subheadings; meaning of the Solow Growth Model, Representation of the Solow Growth Model, Assumptions, and implications of the Solow Model to Kenya.

Answer 1

The Solow–Swan model is an economic model of long-run economic growth set within the framework of neoclassical economics. It attempts to explain long-run economic growth by looking at capital accumulation, labor or population growth, and increases in productivity, commonly referred to as technological progress.

Solow builds his model around the following assumptions:

(1) One composite commodity is produced.

(2) Output is regarded as net output after making allowance for the depreciation of capital.

(3) There are constant returns to scale. In other words, the production function is homogeneous of the first degree.

The economic growth in Kenya, until the 1990s was mainly due to factor accumulation. Since then, total factor productivity has made a small contribution to growth.