Monday, March 28, 2011

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Criticisms of the model

Applying the model to try to explain the growth of many economies, yields the result that the main source of growth is explained by the increase in factor productivity, which causes the model does not explain the considered exogenous. Evidence has been adverse to the convergence hypothesis, known as "sigma convergence", giving rise to the first questions the usefulness of this analytical framework. A defense of the Solow model: conditional convergence in response to the failure of the convergence hypothesis emerged in defense of the Solow model the conditional convergence hypothesis. Under this scenario the convergence depends on the economies possess certain similar parameters, such as savings rates, capital depreciation or population growth. They must also take into account the economic policies followed by each economy.
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