Empirical Discussion of Technological Accumulation and Solow Growth Theory

Abstract

This Paper describes the theoretical explanation of the Solow model with capital accumulation, using a data-driven empirical analysis. First, we focus on reusing the technological investment to increase the rate of output growth. Further discusses an expelling theory of the aggregate production characteristics, the constant retunes to scale in state-level production functions, the diminishing returns to the factor of production, and steady-state condition of the Solow Model. Secondly, we analyze reasonable empirical evidence to explain the close economy with the Solow growth model and the technological capital accumulation. Finally, we illustrate impotency of the technological contribution in the Solow growth and capital accumulation for the economic growth. According to the results explained, during 1959-99. For the period 1959-73, computer inputs contributed less than 0.1 percentage point to annual U.S. But economic growth after 1995, the price decline for computers had accelerated, reaching nearly 28 percent per year from 1995 to 1998. Therefore, investment in computers had increased, and the rising contribution of computer hardware has increased more than a fivefold, to 0.46 percentage point per year in the late 1990s. Software and communications equipment, two other types of IT assets, contributed an additional 0.30 percentage point per year during 1995-98. Preliminary estimates through 1999 reveal further increases in these contributions for all three high technology assets. Therefore, this paper concludes, technological accumulation is the most significant instrument for the exogenesis Solow growth in USA between 1959-1999.