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.
According to the model, output per worker, savings, output per effective worker are responsible for economic growth. Technical change and capital accumulation has increased economies’ ability to produce more products and rapidly increase the real output per capita. This has been a platform to boost international and domestic trade.
It focuses on how to incorporate technological progress in the Solow model, policies to promote growth and growth empirics (Acemoglu, 2008). In addition, it confronts the theory with facts from simple models in which the rate of technological progress is endogenous. The Solow growth model, which is also known as the exogenous growth model, is an economic model that is set within the framework of neoclassical economics. The model tries to explain economic growth by looking at technological progress, productivity, population growth and capital accumulation.