Natural and warranted rates of growth (1930S-40S)

Formulated by English economist Roy Harrod (1900-1978) and Russian-born economist Evsey Domar (1914-1997), natural and warranted rates of growth is a response to the General Theory of English economist John Maynard Keynes (1883-1946).

The natural rate is the maximum long-term rate of growth in the Harrod-Domar growth model where population growth increases the labor force and technical advances enable productivity gains.

The warranted rate is the growth of national income which maintains the equality of planned saving and planned investment.

Also see: Solow economic growth

It is used in development economics to explain an economy’s growth rate in terms of the level of saving and of capital. It suggests that there is no natural reason for an economy to have balanced growth. … Warranted growth rate is the rate of growth at which the economy does not expand indefinitely or go into recession.

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