The Solow Model, Poverty Traps, and the Foreign Aid Debate

Abstract

For almost thirty years the Solow model experienced relative neglect within the field of development economics. However, since the mid-1980s the neoclassical growth model has been at the heart of the debate among economists interested in the important issues of growth, development, and convergence. More recently, the case for increasing foreign aid to sub-Saharan Africa has reemerged and has been linked to the Solow model via the hypothesis that many poor countries are caught in a poverty trap. This paper provides critical commentary on the literature relating to the Solow model, economic development, poverty traps, and the case for foreign aid.