• ISSN: 2301-3567
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    • DOI: 10.18178/JOEBM
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JOEBM 2017 Vol.5(3): 134-137 ISSN: 2301-3567
DOI: 10.18178/joebm.2017.5.3.500

A Post-Keynesian Criticism of the Solow Growth Model

Dicle Ozdemir
Abstract— Solow builds his model based on a continuous production function in the absence of an investment function with a tendency for capital-labour ratio to adjust itself through time in the direction of equilibrium ratio as an alternative to the Harrod-Domar line of thought without its crucial assumption of fixed proportions in production. The problem of the Solow model related to invested function is solved by changes in income distribution between wages and profits in Kaldor model which allows it to disappear the Harrod-Domar instability issue. However, Solow still leaves out to provide a role for prices in adjusting output to changes in demand. As Nell pointed out, the shift from Craft to Mass Production in the post-war era leads to new policy requirements; employment is more flexible than prices and if there is a deficiency in demand due to low investment or wages, unemployment can be reduced by increasing investment or wages.

Index Terms— Solow model, harrod-domar, neoclassical, production function.

The author are with the Mugla Sitki Kocman University, Mugla 48100 Turkey (e-mail: ozded129@newschool.edu).

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Cite: Dicle Ozdemir, " A Post-Keynesian Criticism of the Solow Growth Model," Journal of Economics, Business and Management vol. 5, no. 3, pp. 134-137, 2017.

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