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A VENSIM Simulation of the Solow Growth Model

December 25, 2012

This VENSIM model let you simulate a basic version of the Solow growth model.

VENSIM_Sollow_Growth_Model

A main benefit of using a simulation model is that it enables you observe the process during which the economy converges towards its “steady state” level of output per worker, given an initial level of capital per worker.

For saving rate = 20%, depreciation = 5 %, output = √capital (diminishing returns to capital) and intitial values of capital per worker = 20 and 200 respectively:

Output_per_worker_intial_capital_20_200

Steady state level of output (which is “4 units” of output per worker) does not depend on the intital level of capital but on the other parameters in the model. However the initial level do matter because it affect the adjustment period, as can be seen in the graph.

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One Comment
  1. Oscar permalink

    Hi THC for the model, but the link is broken

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