Harrod–Domar model

The Harrod–Domar model is a long-run economic growth model.

Variables in the model

Name	Variable	Unit	Rival input?	Variable type	Notes
Output	Y	Units of GDP (dollar?)	–	Endogenous
Physical capital (capital stock)	K		Yes	Endogenous	Physical capital includes things like machines, computers, buildings, etc.
Consumption	C
Investment	I
Amount saved	S
Growth of X	$g_{X}={\dot {X}}/X={\frac {\frac {\partial X}{\partial t}}{X}}$	${\text{Time}}^{-1}$
Depreciation (rate?)	δ, d, D	Unitless
Capital per worker	k = K/L			Endogenous
Fraction saved	s	Unitless
Time	t	Time, e.g. years
Production function	F

Mathematical formalism

Discrete

${\frac {\Delta Y}{Y}}={\frac {c\Delta K}{Y}}={\frac {c(sY-\delta K)}{Y}}=sc-\delta {\frac {K}{Y}}c=sc-\delta$

Continuous

${\dot {Y}}/Y={\dot {K}}/K=(sY-\delta K)/K=sY/K-\delta =sc-\delta$

Commentary

Easterly in The Elusive Quest for Growth criticizes this model.

External links

• Harrod–Domar model (Wikipedia)