Solow-Swan model

The Solow-Swan model is an economic theory that explains how a country grows over time. It focuses on three main factors: capital (tools and buildings), labor (workers), and technology. The model suggests that economies can grow by increasing these inputs, but the growth rate slows down as more capital is added—a phenomenon called diminishing returns. Technological progress is essential for sustained growth because it continually improves productivity, allowing economies to expand without running into limits. This model helps us understand how investments and innovations drive economic development and living standards over time.