Differences between revisions 1 and 3 (spanning 2 versions)
⇤ ← Revision 1 as of 2024-07-09 03:00:25 →
Size: 1037
Editor: DominicRicottone
Comment: Initial commit
← Revision 3 as of 2024-07-23 03:15:34 → ⇥
Size: 1103
Editor: DominicRicottone
Comment: Link
Deletions are marked like this. Additions are marked like this.
Line 13: Line 13:
Assume that production is a function of capital investment: ''Y = f(K)'' Assume that production is a [[Economics/CobbDouglasProductionFunction|Cobb-Douglas function]] of capital investment: ''Y = f(K)''
Line 33: Line 33:
This model was a foundation of the [[Economics/SolowModel|Solow model]]. This model was a foundation of the [[Economics/SolowSwanModel|Solow-Swan model]].

Harrod-Domar Model

The Harrod-Domar model is an early economics model of national production.

Contents

  1. Harrod-Domar Model
    1. Formulation
    2. History

Formulation

Assume that production is a Cobb-Douglas function of capital investment: Y = f(K)

Also assume that the marginal product of capital is constant: expressed as either...

  • dY/dK = c

  • Y = cK

Investment into capital over any period (ΔK) is composed of new savings from prior production (s saving rate; sY) less a depreciation term (δ depreciation rate; δK).

It follows that the growth rate of production is equal to sc - δ.

History

This model was formulated first in Domar's Capital Expansion, Rate of Growth, and Employment.

It has been implemented as a predictive model for how much investment is required in order to achieve a target GDP growth rate.

This model was a foundation of the Solow-Swan model.

CategoryRicottone

Economics/HarrodDomarModel (last edited 2025-05-09 20:13:22 by DominicRicottone)