... reality, economic growth is left unexplained! One can say that, in the long-run, Solow's model is stable, because it assumes a tendency towards equilibrium, a balanced economy, since the growth rate of all the variables is constant. So, according to this model, all the world's economies would converge to a certain level, which in reality doesn't happen. Further work developed by Mankiw (1992) found that the Solow model performs well in explaining cross-country differences in income levels, especially when human capital is treated with the same importance as physical capital. However, a flaw remains, for it assumes that the level of productivity and rate of technological progress are the same across nations, which are not verifiable assumptions. Hence, the uprising of the new economic growth theories, which are associated with names like Paul Romer whose work is briefly discussed in this assignment, seeks to make the "technological progress" variable endogenous. ...

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