Economic growth and economic development 93

Introduction to Modern Economic Growth
(A−δ−n)k(t)
k(t+1)
45°

0

k(0)

k(t)

Figure 2.10. Sustained growth with the linear AK technology with
sA − δ − n > 0.
turn to the task of introducing technological progress into the baseline Solow growth
model.
2.6. Solow Model with Technological Progress
2.6.1. Balanced Growth. The models analyzed so far did not feature technological progress. We now introduce changes in A (t) to capture improvements in
the technological know-how of the economy. There is little doubt that today human
societies know how to produce many more goods than before and they can do so
much more efficiently than in the past. In other words, the productive knowledge of
the human society has progressed tremendously over the past 200 years, and even
more tremendously over the past 1,000 or 10,000 years. This suggests that an attractive way of introducing economic growth in the framework developed so far is
to allow technological progress in the form of changes in A (t). The question is how
to do this. We will shortly see that the production function F [K (t) , L (t) , A (t)] is
79