Basic details harrod domer model ppt Economics (Production) MBA, M.COM MA., MCA, BA, M.Sc Ag ,

2. Harrod – Domer model
Presented by:
Siddharth Bharti
M.Sc.(Ag.)Agril. Eco.
Semester - ivth sem.
J.V.College, baraut
Department of Agricultural Economics

4. Meaning of Harrod-Domer Model:-
 The Harrod-Domer Model theories that the
rate of Economics growth in Country is defined by
the level of Savings and Capital Output-Ratio.
Formula =
Savings (S)
C.R.of growth =
Capital OutputRatio(k)

5. Harrod-Domar Model :-
 The Harrod – Domar model is a classical
keynesiyan model of economic growth. It is
used in development economics to explain an
economy's growth rate in terms of the level of saving
and productivity of capital. It suggests that there is
no natural reason for an economy to have balanced
growth. The model was developed independently
by Roy F. Harrod in 1939, and Evsey Domar in
1946, although a similar model had been proposed
by Gustav Cassel in 1924. The Harrod–Domar
model was the precursor to the exogenous
growth model.

6. Requirement of Steady Growth:-
 Harrod – Domer can make Investment in the
process of Economics growth, but they emphasize
the Nature of the duality of Investment.
(I) create the investment income
(II) Increase the production capacity of the Economy
by capital stock
first, the demand effect of Investment and second
can be called fulfillment effect, so till the Net
Investment continues, the real Income and
Production will continue expand.

7. Assumptions :-
These are following –
1- Lack of Government Intervention.
2- There is a an initial full Employment balance
level of Income.
3- Such models operate in a closed Economy, in
where in no any foreign trade.
4- No change in Rates of Interest.
5-The ratio of Capital and Labor to the productive
process is constants.

8. Assumptions:-
6 - The average savings trends is equal to the
Marginal savings trend.
7 - Savings and Investments belong to the same
Year′s Income.
8 - Adjustment between Investment and Productive
Capacity building does not seem too long.
9 - The Marginal savings trends is constant.

9. Criticism of Harrod-Domer Model:-
 The main criticism of the model is the level of
assumption, one being that there is no reason for
growth to be sufficient to maintain full
employment; this is based on the belief that the
relative price of labour and capital is fixed, and
that they are used in equal proportions. The model
explains economic boom and bust by the
assumption that investors are only influenced by
output (known as the accelerator principle); this is
now believed to be correct

10. Limitations of Harrod-Domer Models:-
1- a or s & d is not constant.
2- Labor and capital can not be used in static
proportion.
3- Price are not stable/fixed.
4- Interest rates do not stable.
5- objects are not of a kind/same.

11. Conclusion:-
professor Kurihara explains that is - “Regardless of
these limitations, the Harrod-Domer Growth model
is completely independent which is based on fiscal
neutrality and has been created to reveal the
boundaries of ascending balance for the advanced
Economy.