The Solow growth model is predicated on a constant saving rate.

Instead, it would be much more satisfactory to specify the preference orderings of individuals, as in standard general equilibrium theory, and derive their decisions from these preferences.

This will enable us both to have a better understanding of the factors that affect savings decisions and also to discuss the “optimality” of equilibria—in other words, to pose and answer questions related to whether the (competitive) equilibria of growth models can be “improved upon”. The notion of improvement here will be based on the standard concept of Pareto optimality, which asks whether some households can be made better-off without others being made worse-off. Naturally, we can only talk of individuals or households being “better-off” if we have some information about well-defined preference orderings.

5.1.

More on the topic The Solow growth model is predicated on a constant saving rate.:

1. Exercises
2. References and Literature
3. NUMERICAL PROBLEMS
4. Conclusion
5. Abel A.B., Bernanke B., Croushore D.. Macroeconomics. 10th Edition, Global Edition. — Pearson,2021. — 690 pp., 2021