Solow–Swan Model

A neoclassical growth model in which saving and investment build capital, while diminishing returns, population growth, and technological progress shape long-run output per worker.

Production function: A mathematical relation describing how inputs such as capital and labor generate output. It maps the model’s capital and labor inputs into aggregate production.
Capital accumulation: The increase in an economy’s productive capital through investment, net of depreciation. Investment adds to the capital stock that determines output per worker.
Economic convergence: The tendency for economies to approach similar income levels or growth rates over time. The model predicts conditional convergence when economies share structural parameters.
Harrod–Domar model: A growth model in which saving and capital productivity determine growth, with potential instability between warranted and natural rates. Unlike Solow–Swan, it does not rely on diminishing returns to stabilize growth.
Robert Solow: An American economist whose work on growth theory and productivity earned the 1987 Nobel Prize in Economic Sciences. His 1956 paper presented the growth framework now commonly bearing his name.
Diminishing returns: The property that adding more of one input yields progressively smaller additional output when other inputs are fixed. It prevents capital accumulation alone from sustaining per-worker growth.
Depreciation: The loss in value or productive capacity of an asset over time through wear, obsolescence, or depletion. It offsets investment and helps determine steady-state capital.
Conditional convergence: The tendency for economies to converge toward their own steady states, conditional on underlying characteristics. It captures the model’s prediction without assuming all countries share one destination.
Endogenous growth theory: Growth theories that explain technological change and productivity growth through decisions within the economy. It replaces the model’s externally given technological progress with internally generated growth.
Trevor Swan: An Australian economist known for independently developing a neoclassical model of economic growth. His 1956 formulation established the model’s independent Swan contribution.

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