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Neoclassical Growth Model Assignment Help | Project Help & Tutoring Help

The neo-classical model was an addition to the 1946 Harrod–Domar model that included a new term: productivity growth. Important contributions to the model came from the work done by Robert Solow and T.W. Swan who independently developed relatively simple growth models. Solow's model fitted available data on US economic growth with some success. In 1987, Solow received the Nobel Prize in Economics for his work. Solow was also the first economist to develop a growth model which distinguished between classics of capital. In Solow's model, new capital is more valuable than old (vintage) capital because—since capital is produced based on known technology, and technology improves with time—new capital will be more productive than old capital. Both Paul Romer and Robert Lucas, Jr. subsequently developed alternatives to Solow's neo-classical growth model. Today, economists use Solow's sources-of-growth accounting to estimate the separate effects on economic growth of technological change, capital, and labor.

The neoclassical growth model, also identified as the Solow–Swan growth model or exogenous growth model, is a class of economic models of long-run economic growth set within the framework of neoclassical economics. Neoclassical growth models attempt to explain long run economic growth by looking at productivity, capital accumulation, population growth, and technological development.

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