Solow Model. Calibrated to a SAM for 1950 Usual assumptions Written in Excel for transparency (instead of GAMS) Interpretation and changes are straightforward Produces a counterfactual. Structuralist Model. Calibrated to the same SAM Uses capacity generated by Solow model.
Last period’s profit rate plus a random error term (uniform distribution)
rt = rt-1+ ε
Two ways to model them