Learn Growth Theory: The Solow Model
We explain the causes of long-run differences in income over time and between countries through a theory of economic growth called the Solow model. We will see that an economy's level of savings, population growth and technological progress determine an economy's output and growth rate. We first examine how the level of savings and depreciation determine the accumulation of capital, holding the labor force and technology fixed. We then relax these assumptions and show the role of technological progress and population growth in the determination of per-capita income.