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[edit] Extension to the Harrod-Domar model
Solow extended the Harrod-Domar model by:
* Adding labor as a factor of production;
* Requiring diminishing returns to labor and capital separately, and constant returns to scale for both factors combined;
* Introducing a time-varying technology variable distinct from capital and labor.
The capital-output and capital-labor ratios are not fixed as they are in the Harrod-Domar model. These refinements allow increasing capital intensity to be distinguished from technological progress.
[edit] Short run implications
* Policy measures like tax cuts or investment subsidies can affect the steady state level of output but not the long-run growth rate...
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