Capital accumulation and technological adoptions

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The Solow growth model suggests that poor economies, starting with a lower capital stock, will be able to grow relatively faster than developed countries and eventually catch up with their income levels through capital accumulation and technological adoptions from the developed world.

Data suggests that economic growth has lifted many low-income economies from poverty to a middle-income level and other economies to even higher levels of income. However, very few countries have been able to catch up with the high per capita income levels of the developed world and stay there - a phenomena called a middle-income trap.

Related to the middle income-trap situation, in your opinion, is Solow growth model still valid? What would be some policy recommendations that you think can improve the situation of those middle-income level economies in order to avoid the middle-income trap?

Reference no: EM132667799

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