<P> In fact, Natural growth rate is the highest attainable growth rate which would bring about the fullest possible employment of the resources existing in the economy . </P> <P> Robert Solow and Trevor Swan developed what eventually became the main model used in growth economics in the 1950s . This model assumes that there are diminishing returns to capital and labor . Capital accumulates through investment, but its level or stock continually decreases due to depreciation . Due to the diminishing returns to capital, with increases in capital / worker and absent technological progress, economic output / worker eventually reaches a point where capital per worker and economic output / worker remain constant because annual investment in capital equals annual depreciation . This condition is called the' steady state' . </P> <P> In the Solow - Swan model if productivity increases through technological progress, then output / worker increases even when the economy is in the steady state . If productivity increases at a constant rate, output / worker also increases at a related steady - state rate . As a consequence, growth in the model can occur either by increasing the share of GDP invested or through technological progress . But at whatever share of GDP invested, capital / worker eventually converges on the steady state, leaving the growth rate of output / worker determined only by the rate of technological progress . As a consequence, with world technology available to all and progressing at a constant rate, all countries have the same steady state rate of growth . Each country has a different level of GDP / worker determined by the share of GDP it invests, but all countries have the same rate of economic growth . Implicitly in this model rich countries are those that have invested a high share of GDP for a long time . Poor countries can become rich by increasing the share of GDP they invest . One important prediction of the model, mostly borne out by the data, is that of conditional convergence; the idea that poor countries will grow faster and catch up with rich countries as long as they have similar investment (and saving) rates and access to the same technology . </P> <P> The Solow - Swan model is considered an "exogenous" growth model because it does not explain why countries invest different shares of GDP in capital nor why technology improves over time . Instead the rate of investment and the rate of technological progress are exogenous . The value of the model is that it predicts the pattern of economic growth once these two rates are specified . Its failure to explain the determinants of these rates is one of its limitations . </P>

Why is gdp/capita not a sufficient measure of success of a nation