Scribd Logo
Upload

Welcome to Scribd!

  • 16 views

    Simple Solow Model: Savings Rate 0.238 Depreciation Rate 0.02 Technology A 1.46 Plot Range 1410

    Uploaded by

    Luis Ovalle

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Simple Solow Model: Savings Rate 0.238 Depreciation Rate 0.02 Technology A 1.46 Plot Range 1410

    Uploaded by

    Luis Ovalle
    16 views2 pages

    Original Title

    solow model

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    16 views2 pages

    Simple Solow Model: Savings Rate 0.238 Depreciation Rate 0.02 Technology A 1.46 Plot Range 1410

    Uploaded by

    Luis Ovalle

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 2

    Simple Solow Model

    savings rate γ 0.238

    depreciation rate δ 0.02

    technology A 1.46

    plot range 1410.

    reset

    function of capital, k ; Y = A k and is shown in green. A fraction γ of output is saved and invested
    This Demonstration gives a simple visualization of the Solow growth model. Output, Y , is a

    so investment is I = γ Y = γ A k , shown in red. Capital also depreciates at the rate δ, so


    depreciation is D = δ k , shown in blue. If I > D (as shown in light green), then capital accumulates
    and the economy grows. If I < D (as shown in light red), then capital decumulates and the
    economy shrinks. If I = D we are at a steady state. The parameter A can be thought of as
    representing technology since an increase in A means that more output can be produced from the
    same amount of capital.

    This Demonstration shows the steady levels of output, Y , and capital given the parameters. Note
    that when the savings rate increases, the steady state level of output increases; thus when the
    savings rate increases, the economy will grow from the old steady state to the new steady state.
    When the new steady state is reached, however, growth stops. Thus the Solow model indicates
    that growth must come from a factor that can in principle continue to increase over time, thus the
    Solow model turns our attention to technology or increases in A. See [1] for more discussion.

    The parameters have been set to fit well with the discussion of the simple Solow model in [1].

    Move the cursor over the functions to see the definitions.

    The steady state level of capital, k * , can be very large for some combinations of parameters, and
    in this case the plot range can be extended.

    THINGS TO TRY

    Resize Images ▪ Slider Zoom ▪ Automatic Animation

    DETAILS

    [1] T. Cowen and A. Tabarrok, Modern Principles: Macroeconomics, New York: Worth Publishers, 2010.

    PERMANENT CITATION

    "Simple Solow Model" from the Wolfram Demonstrations Project

    http://demonstrations.wolfram.com/SimpleSolowModel/

    Contributed by: Alex Tabarrok

    Based on a program by: Fiona Maclachlan

    © Wolfram Demonstrations Project & Contributors | Terms of Use

    You might also like