This paper discusses trade and economic growth from the Solow model perspective. The paper attempts to describe how savings, population growth and technological advances affect economic growth. It argues that free trade can boost production effectiveness and living standards.
The technological progress of the Solow model has a new variable of labor efficiency, assumes that technological progress is labor augmenting, and increases labor efficiency at an exogenous rate (Lerner, 1952). In addition, the technological progress of the Solow model starts with a stable returns to scale production function Y = f (K, L).
The strategic and financial lessons emphasized are crucial for students to understand, especially in the new globalization era. Strategic management will become increasingly important in the education of business executives in the 21st century because of its dynamic competitive landscape due to increasing globalization and rapid technological changes.
The Solow model predicts that global differences in steady position output per person occur owing to international differences in technology for a constant capital output ratio. In the Solow model (Solow, 1956), the production technology is constant while income per capita is invariable in the steady state.