Question

According to the Solow model of growth, growth, in the long run (the steady-state), determine only by growth in technology. However, in the Solow model, there is nothing about how technology determined.

1. What factors do you think might affect technology in the long run?

2. Justify your answer and explain the implications to the growth in the long run.

Answer 1

In the solow model the attempts are made by the economist to raise the effort of the capital accumulation and the condition of population growth.
The technological progress in an important part to enhances the overall economy growth in the economy.
The factors of economic structure affect the technology in the long run as follows:
1 The adaptation of capital intensive techniques for infrastructure development.
2 The adaptation of the labour intensive techniques for sector development.
3 The government intervention in the economic variable.
4 The proportion of fixed and variable factors.
5 The productive factors of economic variables.
6 The average labour productivity also an important factor which affect the economic structure.
7 The multifactor productivity also affect the economic structure.
The implications to the growth in the long run are as follows:
1 There is a lack of dilution of the knowledge and the difference in the technology up gradation between the rich and poor countries.
2 There is a problem in the steady rate of mathematical implication in the poor countries.
3 The is an efficient allocation of foreign capital flow when the rate of return on capital is higher in some under developed or poorer countries.