Solow Economic Growth

Discipline: Economics

Named after American economist Robert Solow (1924- ), Solow economic growth highlights the relationship of technological change to growth.

As the rate of return falls, firms turn to more capital intensive methods of production; therefore the rate of investment increases.

However, it is possible to show a situation in which the rate of return would be such that firms would reduce their level of capital intensity, causing investment and the rate of return to decline; this is called capital reswitching.

Also see: roundabout method of production

Source:
R M Solow, Growth Theory: an Exposition (Oxford, 1970)

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