Exercise: Robert Solow and Technological Change

Download instructions for this hands-on experiment here: Robert Solow and Technological Change (PDF document395.0 KB)

Summary:

Robert Solow, a Nobel prize-winning economist, studied the determinants of economic growth.  His most influential contribution was the idea that there are two separate determinants of growth. One is growth in the supply of factor inputs – labor and capital. When a country’s factor endowments grow, so will the quantities it is able to produce. The second determinant is technological progress, which increases the productivity of factor inputs. Growth in total factor productivity (TFP) allows the same quantity of all factor inputs to generate more output.

In this model exercise, you will explore the effects of TFP growth in one sector of the U.S. economy, manufacturing, and identify both the direct effects on the MFG sector of the economy and selected indirect, or general equilibrium, effects on the rest of the economy. 


Last modified: Wednesday, 4 September 2024, 8:34 PM