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diff --git a/examples/solow_swan_economic_growth/model.modelica b/examples/solow_swan_economic_growth/model.modelica new file mode 100644 index 0000000..1a91faf --- /dev/null +++ b/examples/solow_swan_economic_growth/model.modelica @@ -0,0 +1,19 @@ +model SolowSwan + "Simple economic growth model" + Real Y "total production"; + Real K "capital factor"; + Real L "labor factor"; + Real A "labor-augmentation factor"; + parameter Real L_0=1 "initial labor"; + parameter Real A_0=1 "initial labor augmentation"; + parameter Real alpha "elasticity of output with respect to capital (0 to 1)"; + parameter Real n "labor (population) growth rate"; + parameter Real g "augmentation growth rate"; + parameter Real delta "rate of capital deprecation"; + parameter Real c "consumption vs. investment fraction (0 to 1)"; +equation + Y = K^alpha * (A * L)^(1-alpha); + L = L_0 * e^(n*t); + A = A_0 * e^(g*t); + der(K) = (1-c)*Y - delta*K; +end SolowSwan; diff --git a/examples/solow_swan_economic_growth/page.md b/examples/solow_swan_economic_growth/page.md new file mode 100644 index 0000000..7d88c13 --- /dev/null +++ b/examples/solow_swan_economic_growth/page.md @@ -0,0 +1,64 @@ + +The Solow–Swan model is an exogenous growth model, 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. At its core it is a +neoclassical aggregate production function, usually of a Cobb–Douglas type, +which enables the model "to make contact with microeconomics". The model was +developed independently by Robert Solow and Trevor Swan in 1956, and superseded +the post-Keynesian Harrod–Domar model. Due to its particularly attractive +mathematical characteristics, Solow–Swan proved to be a convenient starting +point for various extensions. For instance, in 1965, David Cass and Tjalling +Koopmans integrated Frank Ramsey's analysis of consumer optimization, thereby +endogenizing the savings rate—see the Ramsey–Cass–Koopmans model. + +## Conditional convergence + +The Solow–Swan model augmented with human capital predicts that the income +levels of poor countries will tend to catch up with or converge towards the +income levels of rich countries if the poor countries have similar savings +rates for both physical capital and human capital as a share of output, a +process known as conditional convergence. However, savings rates vary widely +across countries. In particular, since considerable financing constraints exist +for investment in schooling, savings rates for human capital are likely to vary +as a function of cultural and ideological characteristics in each country. + +Since the 1950s, output/worker in rich and poor countries generally has not +converged, but those poor countries that have greatly raised their savings +rates have experienced the income convergence predicted by the Solow–Swan +model. As an example, output/worker in Japan, a country which was once +relatively poor, has converged to the level of the rich countries. Japan +experienced high growth rates after it raised its savings rates in the 1950s +and 1960s, and it has experienced slowing growth of output/worker since its +savings rates stabilized around 1970, as predicted by the model. + +The per-capita income levels of the southern states of the United States have +tended to converge to the levels in the Northern states. The observed +convergence in these states is also consistent with the conditional convergence +concept. Whether absolute convergence between countries or regions occurs +depends on whether they have similar characteristics, such as: + +* Education policy +* Institutional arrangements +* Free markets internally, and trade policy with other countries. + +Additional evidence for conditional convergence comes from multivariate, +cross-country regressions. + +If productivity growth were associated only with high technology then the +introduction of information technology should have led to a noticeable +productivity acceleration over the past twenty years; but it has not: see: +Solow computer paradox. Instead world productivity appears to have increased +relatively steadily since the 19th century. + +Econometric analysis on Singapore and the other "East Asian Tigers" has +produced the surprising result that although output per worker has been rising, +almost none of their rapid growth had been due to rising per-capita +productivity (they have a low "Solow residual"). + +## References + +The page body text came from Wikipedia. + +* Wikipedia: [Solow–Swan model](https://en.wikipedia.org/wiki/Solow%E2%80%93Swan_model) |