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Descriptive Models of Growth

In: Intertemporal Macroeconomic Models, Money and Rational Choices

Author

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  • Giuseppe Chirichiello

    (University of Rome)

Abstract

The Harrod-Domar model of growth (Harrod 1939; Domar, 1946) is a dynamic extension of the simple real (moneyless) Keynesian model. It is built on the following assumptions: a) production technology admits constant returns of scale. In particular, it is assumed that technology has fixed coefficients v and u for inputs of capital K and labour L; b) aggregate consumption function C is the canonical long-run Keynesian consumption function. This function is assumed to have constant and identical marginal and average propensity to consume. Aggregate savings function S, therefore, also has constant and identical marginal and average propensity to save; c) capital stock and labour grow over the time. Capital grows because of investments, labour grows because of population growth. Both these circumstances impart to the model a dynamic character.

Suggested Citation

  • Giuseppe Chirichiello, 2000. "Descriptive Models of Growth," Palgrave Macmillan Books, in: Intertemporal Macroeconomic Models, Money and Rational Choices, chapter 1, pages 1-23, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-333-97742-2_1
    DOI: 10.1057/9780333977422_1
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