Cvowth and Deuclopmwt Model)

Hanod and d)oma Mede

*Havec and Doma irndendd he keynesiaw
analysis ef income and nemploynent t
problem ot econoic qhowth and
dong- Ruwconsdered both the nnceme
theeore wwestnnt
Capacity ffect o ek to
medlelu
and Dowa
*he Havo Jate a t wtuc
cletimine hat ncome mist go
Aestmnt andU malained
mploymnt uuel is m
hat f l tinu
Long pUied
owth is Cchieed Skddy stat
*Bo th
Hem assigned To Lapacityduelopmnt
the
ation they dmphassi
pross,hamy nang But
Hhat the deuble ele t
income ineeased demand) n
geneating pocue capag ot
acodng to he cenomist
Jhe classiea
the Bonemy attentien to the capaty sdu
contines thii H aie keynesian
Gny, wheeas the poblem emand
econeists Studieo
au Deminan cende
ny wtras Havod
Bothh side Hantsd- Deno

shott Run Aong Ru

Bothh d a n d and
olemend
Sid Sfply siole
But suppy Sio
Consont
leuat

* Qual fect o uestnt Shcome Ehct

and capacty Efet
 ietmt has
estnent nlase aguga deumand an
o e t thee pLeple tisgh
n cwe the wulplie proess
and seconoly pooucte copaty
aditonas to
the 2oheg Hoeugh the to acon
While Keynes took
stoek a captal. whil
the denand tet o iiestmentt. qnod

Sucome Ruodu chve (

I ()) - AD copauty
Mod of lrasth Suppy
Haod- Doma Moou iwe stmnt
Jhe maw warialoes heey fo natw
avd sawng they plod dua
imestment Snestment will estvent
qnec demand en the o t h h a d
Will also genrat
peducte
oditie capacily ud
hence ate suppy
Assumpho
Ofulb smployment
@ No lovt sinteene
(tm)
Ne la in aiustuent neome is cens tas,
dabew
Neustittions ot tato stu abow d capita
J) contant Retw to sale'
(hharatid Rat lnouth
Jhe rate of gnowth which tt t
will keep the e t e s B a t t d that they
haue pocucd neth me than
jught not Reing Salistid wit the achieue
this owth ate the etrenews
will
matain o ppetua
puptuat the
He sanu Rati ot
qowth. Waald K 2ot is Hhus uillnom
 snies that Procduce
thesnses
I+ thy chieue Lal ndced to mantan
it'
Natna Kate iowhh limitt ot lvoust.
howene conne qo onw ndlefinitily
panion, heueme natwa
a
abowr
he awailailiy otweld pt
hu imit n the th
hati the waLante
werd
Jate it isnt necessa attaind
this Ue w miind
wh
Haeo ntooluc
Natia Rate ot growth'(ln)
the maUe
alloued by the inceases th, tichnelo gica
Vaiiaole like
ike Ropulatiow
npreuewents and grewt the ighest attaun
Kesees
bleeqowth Kate wtih weuld bng abot
the esowee
He fulest possible mploymeno ot
be
Consiow the celing wate
as
asm
Joaw Robison calls
feasibl rate o growth
lrowth Rate i- e= s
Ata
is grawth Rate y eutput
saving
captal
which taus the
poteni qroth Rate
ertupnwiab iquildiwm
aw Cr = S’ Co
copitol
maintan Waatid
Requn
rowh
capita
Rat
Natiwal gowth Rat:- t the arimn
gewth Ratu tul ploynt tHhat Can
be ahieed
 Knife - ldge uilbrm

Ca he dviathon prom the steady Patt.

case-I
dipression
le. depvess On
C Cr depressien Cy

4latio
deso oapreasion
C dupnessiow Boow
DemaU Moae
I
Damand sicw: - Ya I
I Net 4westment

Buppy Bicwi- = ok
ot capital
K Rea capita
Cencitiew for
fe achiwng skooy
AK (0k= I
hange Jnvestent

I
qubriwm and the conditie
Kaze -cge
mamtain
te sfeacy
I'0emand> suppy
oepre ssi en
I Jemant <S"pply
olos wthle
*Undu
l vauable moolel Boo and
Jrati
ewth Population and Brogss.Jehnical
solouyMed
Knewn alse by"luwe
ontubton
th To Solew
Modelt doleuA "
Model'
cloar. Harod
Aceleralo Havocl
loma
Capta Gitput
otput Capita Honed’
ole
otpu mangnab
(o) iatie lapilal - ratto etput
ar whuet ()Harod
nnta conept
tconep the wses
pinepl
aclation whue mulip
base mole Hared
Based i's Mode Doma ()
Dissimlartes
Squilrun dge Knil
Both ay neess
Lo cnd k/o fixec ssne
Sawing. Ai)
Jestnent
conditiow
ed asswwplio Omian
lates)
 Solow Moole
H- D Mede
JOfed techuic vaicbte cotticint
cetiint
2)Siubsittion
capital isn't Possible Possible
diegence toward ubvid
fro ipidibro
capTal for fossibfe -s t
Assumpho H-D Model.
)sstittiow of,labow
conslant Retwn e Scale
Same
full imploymt
4 Peryect compettiow
on of
conelusion Solour Mode
iquilbiu
*lrow H Rati et outt o peplatiow
the gowth at
the
doesnt depnd upo
saing Ratehat is i t is ojenous to saving Rate
Sawing. (laowth late of output
Rale o
Atthough sawing Ratu de etput, it
* row th ate
SAay - lat Meacy -statu
an
dos cause Sneome (aud theoe
caita
e of p - though rasing capital
also total gncome)
Per head eo
eal sawing ktuLsect
Capital'sfookO

sawng Rati , copta

Ratu
(totad autput)
Sawing capita
stock output
Per captaw
stiacy stote ati p capita
wcoe, that
that iss hamgRo
steehelt
Joesn't dtirui howth Rati ot Populahon d (otoor foce
saving Roite detinmie yrowth Rati (skady stati (aptal setk
*A SIgnitiant Conclsien hee - classical gowtha
ttheey
the
tatt it the wtes
Saving an
haue
Sane
Rate of population nowt Rate an haue
to the Sane technoegy ie puodttow f)
thinlee ot pu- capta
Cenege hat s
neoe will eweay
will wltiatily becewne
tqual (Covcept f conrgen touod
Denust. fs che and state Jhe peo centis
poe becase thy hae desi captal
lbt it thy saue the same cs Rich
cownties Qnd hae access t o Sane
cateh p
teeholegy thay will w i a g fove

Endoqunous qroth theory Te apitol

* Lhe sotetimaaiAietassegewte Model.

eaplais th Aeng gnow t Sativaiabls
Ruw enegenueus :
guowth and the ate
Jhe ate of popuatien thot i indepndnt
t tehica piogess
of th saving Rat maittaiis
tauns that
*Enclegeneus rowt theey thee usut
ecevemie grew t s primaily
t a n e t w a &e
ntenafoes? athe
ot w produciuty
thhat wpemnt i
t arguestied fastU ineatien
to
can be
mstneint iw h m capta
and
fren the govenent and pwat setU
with
intiien Jhis w centasts
lassca econewnics

anges that
by mab poses
nnovatiow and westment
huna capta, wncotee
uathe thouw estna foresy
capita the ies
neolasicol Sconomist
challeugng
 factou beind piocc cos
ae thoy oftn utizie fo elyng too wu
ate assumptiow the
prou model Ualidity
tehial nolojeneous Human
Jntennat fatlor of capiTal Cpital
Progress Jependent skill.i
/eo-dessie)olo Model SudogentougSduca,
Xxogineous Model Bnelogeeous factor
bogeno s fato a Responsible for Buonomio
Kesponsi blc for Buonomo gowth w
fous mer
qrow th uma capita
Asumphon
fo a factos
neuasng Retn to Salw fo
takew togete
contant Rw scale to
to scale Single faclo
basis
Rv qwth Ret ticnia Brogess.
ong st
endlogeneous tcto -
inesnnt capital
ipvds conslat saving Kato
(s) Assne
Rate nogeno4 ditoniine
Sawig
H-D Mo e Sndogenous
Solou Nee Mocde
Retiw
*plinn shing Rtww Sneaswg facto
conslat Retwn e veasirg Ritunto Scalu
Scale for a factor taken toge fhu
censta Retun to scalw
for facton
Andoqunous onomist
Hirefuw Uzava ((96s) awd
Annow (196 2) ’ foed basis og Researh
Mige sdnaski (988)
Paud Rome (1386) , Robet eas (988).srqie (i31)
and oitigueina nd Sautos (133t) ’ tehnoloica
 lAnow- Model Ak leaing
moole
By dog
Knew as Aaplan econoi
avw ede is
the nnovatio
chhanges heyesultt
eanegeoleisg"
tlnology
clse wsed n the aot
'ectice and
bde te
novation
erplaw
estt
hou improued huna Capitl
Pocluctiiity and
St beccuse eanng Aabowngteg eot
wnit ot output
Uzaw- lucas Modeb pans how
- ucas mod is
tHhe dog
econne grow th
the a c M l a t o n
attubuleo to
pouce hman capital,
oo
capital.Bw shoul to dhefew, th
edueatin be
model aswnes that unan captal
theeductien Secto
gly put eleent
c s s e that ceneo Gulpt
st clso
plysicad capital
hma capa fuweshnet technolo1

Modec] earning By setmet

Romer consideed change to
he Kowe
Rome Moole
tihnoogy to be ndog enous heye
adocnent eds Te cooie
tehneogical
inprouennt Additonally the wodl ale
a
assmes that inevatie idlas
mpota pat Conbining
Ueate i n e a t u e idea
Austing knoge
te enhane the pedutiy