SOLOW NEOCLASSICAL ECONOMIC GROWTH MODEL: PROPOSAL OF A NEW APPROACH

Abstract

The neoclassical Solow (1956) model is, non-arguably, a universal reference in term of exogenous economic growth model. Nonetheless, an important potential of this model could be unleashed if a different mathematical step from what is commonly known is adopted, in the case of technical progress, as well as in the case of presence of human capital. In both cases, it appears more clearly that Technical Progress and Human Capital, which are exogenous, in the sense that they are independant of the physical capital, are contributing in the effort of compensating, and even, overtake negative effects of both demographic expansion and depreciation rate, and their effect may eventually results in eliminating the steady state, therefore allowing, so to speak, the economy, to grow indefinitely.

This article reinforce the role of technology, specifically, and of knowledge in general, in triggering economic growth and changes in developping countries, which are generally struggling with high demographic growth rates and poorly maintained infrastructures.