The productivity parameter,
, plays a larger role in the Solow model than it does in the production model.

Question

The productivity parameter,  
, plays a larger role in the Solow model than it does in the production model.

Quizplus · Accepted Answer

In the Solow model, the productivity parameter (A) is a crucial determinant of steady-state output per capita, since it represents the level of technology and efficiency in the economy. In the standard production model (e.g. Cobb-Douglas), the productivity parameter represents the level of output that can be produced with a unit of each input, but it does not play as large of a role in determining long-run growth as it does in the Solow model.

The Productivity Parameter