Question

which of the following elements of Solow-Swan model did the Romer model endogenies?
A. the growth rate of labor force
B. the growth rate fo labor efficiency
C. The saving rate
D. none of above is correct
E. the depreciation rate

Answer 1

Q) Ans:-

Step1)

The Romer Model is designed to explain why and how to advance countries exhibit sustained growth. In contrast to the neoclassical model (Solow), which could be applied to different countries, the Romer model describes advance countries of the world.

Step2)

The Romer model endogenies technological process by introducing research for new ideas by researchers who are interested in making profits from their invention. Thus, labour efficiency is increased endogenously.
Therefore, the correct option is (B).

Step3)

Option (A) is incorrect because like the Solow-Swan model, the Romer model also assumes the growth rate of the labour force to be given.
Option (C) incorrect because the saving rate is assumed to be exogenously determined in the Romer model.
Option (D) is incorrect as technological progress is determined endogenously in the Romer model.
Option (E) is incorrect as depreciation is also exogenously given in the Romer model.

Step4)

Conclusion:
Hence, the correct option is (B).