Neoclassical growth theory,
Definition of Neoclassical growth theory:
The theory states that short-term equilibrium results from varying amounts of labor and capital in the production function. The theory also argues that technological change has a major influence on an economy, and economic growth cannot continue without technological advances.
Neoclassical growth theory is an economic theory that outlines how a steady economic growth rate results from a combination of three driving forces—labor, capital, and technology. The National Bureau of Economic Research names Robert Solow and Trevor Swan as having the credit of developing and introducing the model of long-run economic growth in 1956. The model first considered exogenous population increases to set the growth rate but, in 1957, Solow incorporated technology change into the model.
A theory used in economics that identifies the factors necessary for the growth of an economy. It emphasizes the three factors that influence the growth of an economy, which includes capital, availability of labor and technology. It states that a temporary equilibrium can be achieved when capital size, labor and technology is appropriately adjusted. The theory also states that temporary equilibrium differs from a long-term equilibrium, which does not involve any of the three factors.
How to use Neoclassical growth theory in a sentence?
- While an economy has limited resources in terms of capital and labor, the contribution from technology to growth is boundless.
- The theory states that economic growth is the result of three factors—labor, capital, and technology.
- Robert Solow and Trevor Swan first introduced the neoclassical growth theory in 1956.
Meaning of Neoclassical growth theory & Neoclassical growth theory Definition