Growth Concepts & Types
The definition of economic growth using GDP.
Sustained increase in real GDP at full employment
Domar's equilibrium growth rate formula
g = s / σ
The three factors of income in the Solow model.
Capital (K), Labor (L), Technology (A)
The goal of the Golden Rule savings rate.
Maximize steady-state consumption per worker
The two sectors in Lewis's dual-sector model.
Traditional (agriculture) & modern (industry)
Growth driven by adding more workers, land, and enterprises.
Extensive growth
The two parameters growth is proportional to in Domar's model.
Savings rate (s) and capital productivity (β)
Solow's key fix to Harrod's knife-edge problem.
Factor substitutability (K and L interchangeable)
Steady-state consumption formula per worker.
c* = f(k*) − δk*
The core mechanism in the Lewis model.
Labor transfer from agriculture → industry
Growth achieved through improved resource quality and new technologies
Intensive growth
Harrod's three types of growth rates.
Actual (G), warranted (Gw), natural (Gn)
The Solow steady-state condition in per-worker terms.
sf(k*) = (δ + n)k*
The Golden Rule optimality condition.
MPK = n + g + δ
Wage level in the traditional sector until surplus labor is exhausted.
Subsistence wages
The two time horizons of economic growth
Short-run & long-run
Harrod's steady-state condition, never automatically achieved.
G = Gw = Gn
The only factor sustaining continuous per capita growth in Solow.
Technological progress (TFP)
Two investment categories Phelps extended the Golden Rule to.
Human capital & R&D
How neo-Keynesian models treat production factors.
Non-substitutable — Leontief function
The production function underlying the neoclassical model.
Y = A · F(K, L) — Cobb-Douglas
When G > Gw, this cumulative problem occurs.
Knife-edge instability — inflationary boom
Solow's conclusion about high population growth.
Reduces capital per worker → lower income
Why capital deepening alone cannot sustain long-run growth.
Diminishing returns — only TFP shifts production up
Mill's term for zero net investment equilibrium.
Stationary state