The Study Of Harrod-Domar Economic Growth Model

Economic growth is the permanent subject of the economy, each country hopes a sustained and stable growth in its national economy. In 2008, after the U.S. financial crisis, in order to address the financial crisis, some experts pointed out that the U.S. need to increase the savings rate, reduce consumption; And China need to expand the consumption, lower savings rate. Why make such a diametrically opposite situation? This paper attempts to find the theoretical basis of this problem.Harrod-Domar growth theory is from the relationship between savings and investment, proposed economic balanced growth conditions. Before Harrod and Domar, the classical economists have studied the relationship between consumption, savings, capital accumulation and economic growth:Adam Smith emphasized that capital accumulation is the importance of economic growth.for the same time, he also attached great importance to the motive of capital accumulation, that is also the problem that study determined the amount of savings; In the "Malthusian trap" this equilibrium, the per capita savings is zero, economic stagnation; Ricardo think that the law of diminishing returns because of the profit will decline, thereby inhibiting the accumulation of capital, while also inhibiting the growth of the economy; Marshall mentioned in his book capital-output ratio of the implications, and pointed out that with advances in knowledge and technology, capital-output ratio is falling, while Marshall also mentioned the source of capital accumulation and the function of capital accumulation. Harrod and Domar is developed on the basis of classical theory of economic growth, its investigation of the problem is:the production of a country in a long term, according to a constant growth rate, year after year the conditions of needed to have balanced growth.Harrod-Domar economic growth model is the beginning of modern economic growth theory, since then, economic growth theory embarked on the road of use mathematical tools for analysis. Neoclassical growth model was originally proposed by U.S. economist Solow, Swan et al in the mid-20th century, developed on the basis of criticism and correction Harrod-Domar model, as the assume that fixed proportion of the production function in the Harrod-Domar growth model, making the model unstable. In order to eliminate this instability, Solow the capital-output ratio of endogenous obtained the conditions for stable economic growth. Solow-Swan model has become almost half a century after the model of economic growth starting in the benchmark.Harrod-Domar growth model, while having no stability, but it includes labor, capital investment, saving, population, technology and other factors of economic growth theory models of all the basic starting point. Its economic growth theory is an important position, although the model of the capitalist society economic growth, but also for China's economic growth has important implications:he stressed the importance of capital accumulation, the Government The role of intervention and the relationship between savings and investment, etc., are worth our serious consideration.