Examine the mechanics of the 'Solow-Swan Growth Model'. What is the primary source of long-term economic growth within this neoclassical framework?

💡 Solution & Explanation

In the Solow-Swan neoclassical growth model, capital accumulation alone leads to a steady state due to diminishing marginal returns to capital. Therefore, sustained long-term growth in output per worker can only be driven by exogenous technological progress. Savings rates influence the level of steady-state capital stock but do not generate permanent per capita growth on their own. Endogenous growth models later attempted to internalize technological change.