Harrod-Domar Growth Model

Harrod-Domar Growth Model

A model for what creates economic growth. According to Harrod-Domar, growth equals a country's savings rate multiplied by the marginal product of capital less depreciation. Essentially, high savings generates growth because savings are eventually invested. The Harrod-Domar model has been used to explain lack of development in some parts of the world: because there is little capital to be saved, there is less capital to invest. Critics, however, contend that the model confuses growth and development (which are distinct) and that it can encourage reckless borrowing to spur development.
References in periodicals archive ?
Economic mechanism by which more investment leads to more growth can be described in terms of the Harrod-Domar growth model, today often referred to as the AK model based on a linear production function.
In other words, one may say that in Harrod-Domar Growth Model, investment in fixed capital or capital-output ratio provides us with the demand and supply sides of the question, the solution of which may yield the required rate of growth.
Following Grobar and Gnanaselvam (1993), a simple Harrod-Domar growth model is used to estimate the effect of the recent increase in defense spending on economic growth.
While the Harrod-Domar growth model perceived the capital-output ratio, v, as a constant in the warranted growth expression, s/v, the dual theory considers it as a variable.
The origin of empirical analysis between aid and growth could be traced back, as far as the Harrod-Domar growth model.
Mathematical economists ignored these points and Harrod's original work was presented in textbooks as the Harrod-Domar growth model.
Subsequent chapters offer somewhat less novel, but always very interesting, applications of the underlying arguments to other important topics in Marxian-Kaleckian political economy, including the theory of crisis, in which the role of money is (quite correctly) emphasised, and Evsey Domar's version of the Harrod-Domar growth model (both in chapter 5).
The submitted work included evaluations of Wassily Leontiev's input-output analysis with special reference to its historical roots in Francois Quesnay's Tableau economique and Karl Marx's reproduction schema, the 1930s capital controversies and their roots in the 1880s and 1890s, institutionalist critics of the literature commencing with an overview of Thorstein Veblen's work and continuing with the Kiel school, as well as precursors of Harrod-Domar growth models likewise going back to Quesnay and Marx.