Economic growth:The Solow Model

Alex Tabarrok 

The Solow Model is a workhorse model of economic growth. Many subsequent papers in growth theory and in business cycle theory build on this model. A model of growth helps us to structure our thinking. Why is it, for example, that China is growing faster than the United States despite having much poorer institutions such as the rule of law?  Surprisingly, even a simple version of the Solow model offers some useful predictions and ways to interpret aspects of the the growth data. At MRUniversity this week we have four videos on the Solow model. These videos are a bit more technical than many of our previous videos and we think they will be useful in many other classes such as macroeconomics, especially if you are using a truly excellent textbook. The videos will also be useful for anyone who wants to read more of the literature on growth theory or the empirics of growth (such as can be found, for example, in Barro and Sala-i-Martin’s Economic Growth or David Weil’s textbook Economic Growth). Even if you don’t want to study the theory in more depth, we think these videos will be useful for understanding development and how economists use theory and data to understand the sources of growth (and its absence).

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MercatusCenter The Solow Model is a workhorse model of economic growth. Many subsequent papers in growth theory (and in business cycle theory) build on this model. A model of growth helps us to structure our thinking. Why is it, for example, that China is growing faster than the United States despite having much poorer institutions such as the rule of law? Surprisingly, even a simple version of the Solow model offers some useful predictions and ways to interpet aspects of the growth data. The four videos in this section will be especially useful for people who will see the Solow model in other classes and for anyone who wants to read more of the primary literature on growth theory or the empirics of growth (such as can be found, for example, in Barro and Sala-i-Martin's Economic Growth or David Weil's excellent textbook Economic Growth). We think these videos will be useful, however, even if you don't want to study the theory in more depth. We also offer a briefer treatment in our video The Solow Model (Brief, no math).