Harrod-Domar Growth Model
The knife-edge predecessor to Solow: growth from the saving rate and capital-output ratio.
The Harrod-Domar Growth Model model, in writing
Definition
The pre-Solow growth model: with a fixed capital-output ratio, growth equals the saving rate divided by that ratio, a knife-edge with no self-correction.
g = s / v (saving rate over capital-output ratio)
The intuition
If machines and output are locked in fixed proportions, saving mechanically buys growth, but any mismatch between warranted and actual growth spirals rather than heals. Solow's diminishing returns replaced the knife-edge with a stable steady state.
Exam tip
Use it to explain why 'financing-gap' aid models failed: v isn't constant and saving isn't destiny.
Related models in Advanced Macro & Growth