The Solow Model and Standard of Living

Abstract

All across the world, living standards vary significantly. The Solow growth model, developed by Nobel Prize winning economist Robert Solow in 1956, is still one of the most commonly used models in economics to explain economic growth. This paper will outline the Solow growth model, and its assertion that increases in total factor productivity (TFP) can lead to limitless increases in the standard of living in a country. Much of the mathematical notation and explanation has been derived from Stephen Williamson of Washington University. Additionally, it will provide empirical examples illustrating the model’s ability to match real-world data.