solow-swan

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Here’s my explanation of the model…

Solow-Swan Growth Model

Capital deepening towards steady state equilibrium

Model Parameters

Steady State Capital per Worker (k*): 8.00

Capital Accumulation Over Time

Solow Diagram: Investment vs Break-even

Key Insights

  • Steady State: When investment per worker (sf(k)) equals break-even investment ((δ+n)k), capital per worker stops growing
  • Capital Deepening: Below k*, investment exceeds depreciation and population growth, so capital per worker increases
  • Convergence: The economy naturally moves toward k* regardless of starting position
  • Growth Stops: At steady state, capital per worker is constant (but total capital still grows with population)

See also: Bayesian updating

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