An Analysis of The Solow Growth Model, Comparing Japan and Morocco between 1990 and 2020

This paper applies the Solow Growth Model in a comparative analysis between Japan and Morocco during 1990 to 2020. By using data on GDP per capita, consumption to GDP ratios as well as investment to GDP ratios that are sourced from the World Bank and International Monetary Fund, the study analyses how well the Solow Growth Model’s predictions hold in explaining growth in developed versus developing economies. The results indicate that Japan, which represents developed economies, has characteristics that are consistent with the Solow model’s steady state equilibrium. Examples of this include stable growth and diminishing returns to capital. In contrast, Morocco, a developing country, shows slower and more volatile growth. Morocco had shown inefficiencies in capital allocation along with high consumption levels, which limits the model’s explanatory power. To account for these discrepancies, institutional quality and corruption are considered, factors which are omitted from the original Solow framework. These findings show the importance of governance along with technical progress when analysing growth, as it is found that while the Solow Growth model is a useful tool, it alone is not enough to fully explain growth patterns, particularly in developing countries.