Economic History

Practical class #4

Ricardo Gouveia-Mendes

Undergraduate in Economics
1st Semester 2023-24

Today’s Class

  1. The Solow Growth Model
    1. Quick review
    2. The golden savings rule
  1. Relaxing Solow Assumptions
    1. Harrod-Neutral Technological Progress
    2. Hicks-Neutral Technological Progress and Growth Accounting
  1. Exercises 4.3, 4.4 and 5.1


Solow, Robert M. (February 1956). “A contribution to the theory of economic growth”. Quarterly Journal of Economics. 70 (1): 65–94.

Robert M. Solow (1924–)
Nobel Prize in Economics (1987)

Sir Roy Harrod (1900–1978)

Sir John Hicks (1904–1989)
Nobel Prize in Economics (1972)

Now, you know that…

  • Increasing inputs may lead to short-run growth, but not to long-run growth
  • Countries with the same \(s\), \(\delta\) and \(f(\cdot)\) should converge to the same steady state
    • Convergence should be faster the more far apart the countries are from their steady state
    • Real convergence patterns do not match the Solow Model predictions
  • Productivity is what drives long-run growth, even if it is hard to measure