In order to raise capital formation in the economy we have first to raise ratio of surplus to capital or rate of surplus to national income and then measures have to be adopted to mobilize this surplus for purposes of productive investment. 1. Raising the Ratio of Surplus to Capital: In this connection the distinction between potential economic surplus and [...]
We shall explain below Joan Robinson's model of capital accumulation and growth which is suited to the labour-surplus conditions of less developed countries. Harrod and Domar extended the Keynesian analysis of income and employment to the long-run setting and therefore considered both the income and capacity effects of investment. Harrod and Domar models of economic growth explain at what rate [...]
In this article we will discuss about:- 1. Introduction to Harrod-Domar Growth Model 2. Domar’s Growth Model 3. Harrod’s Growth Model 4. Relevance of Harrod-Domar Growth Model for Developing Countries. Introduction to Harrod-Domar Growth Model: Keynes in his General Theory was concerned with the determination of income and employment in the short run. He explained that since in the short-run [...]