Harrod–Domar model

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

Model assumptions

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 KYc = sc - \delta

Continuous

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

History

Commentary

Easterly in The Elusive Quest for Growth criticizes this model.

See also

External links

References