Solow's Theory Of Economic Growth

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Many economists have argued that determining a growth strategy is not a simple task for any state, and in any case it is, the developing countries will have grown enough to move their economy with the developed country. It is out of this problematic issue of determining the right formula to apply in a given country that is aimed at achieving a desired economic growth, Economist Solow to come up with Solow Growth Model, which emphasis on the progress in technology that result in the growth of an economy. Solow argued that without the use of technology, economic growth will cease due to diminishing returns in inputs (Solow, 1956). Despite the fact that this factor of technological development has not gained universal acceptance, it has influenced…show more content…
It is the human capital investment, knowledge and innovation that contribute significantly to the economic growth. The theory also gives a focus to the spillover effects and the positive externalities from the knowledge-based economy that leads to economic development. It is from these perspectives that this theory holds policy measures as the key determinants of economic growth. For instance, subsidies to research institutions or the provision of education may lead to an increased endogenous growth as a result of the increased incentive for innovation. On the other hand, exogenous growth theorists gave their support to that economic growth highly depends on either the rate of savings or the technical progress rate (Solow model). However, the rate of saving and the technological progress rate remain unexplained. As a result, the endogenous growths try to overcome the shortcoming by creating a model.(Solow, 1997; 2000). The implication of the endogenous growth theory is that policies that embrace competition, openness, innovation and change will ultimately promote economic…show more content…
Its economic growth in the 19th century was sluggish, but in the beginning of the 20th century, it witnessed a rapid growth in the economy, which was stimulated by the growth in the Chinese republican revolution, the First World War and light industry. It is seen as one of the most populated countries worldwide, with a population of sixty-three thousand people. It has the world lowest birth rate of 1.11 per woman as per 2012 reports. This was contrary to the two decades ago that witnessed a higher rate of mortality in Hong Kong. As a result of low birth rate, the government has been able to plan its policies, therefore, ensuring there is a steady growth in the economy. The effect of world war one and occupation of Chinese in Hong Kong for four years led to population decline. Hong Kong under the leadership of Britain thrived in economy, and when it was returned to China in1984, its economy continued to grow. Later, it became China Special Administration region in 1997. It thrived in economy under this administration and, today, it contributes to more than 33 percent of foreign capital flow to the region of china. Its economy has been ranked by the wall street journal as the freest economy in the world (Melanie,

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