Three criticism of harrod-domar model
1) Simplistic Assumptions: The Harrod-Domar model makes several simplifying assumptions that limit its applicability and usefulness. For example, it assumes a fixed capital-output ratio, which means that the capital-output ratio remains the same regardless of the level of investment. In reality, the capital-output ratio is likely to change as investment levels increase, making the model less accurate in predicting economic outcomes.
2) Lack of Precision: The model lacks precision in its predictions and does not take into account important factors that influence economic growth, such as technological progress and human capital. It assumes that investment automatically leads to economic growth without considering the quality and efficiency of investment. This oversimplification can lead to inaccurate projections and policy recommendations.
3) Neglects Income Distribution: The Harrod-Domar model does not consider income distribution and inequality, which are important determinants of economic growth. It assumes that investment and savings automatically translate into increased output and employment, without considering how the benefits of growth are distributed among different segments of the population. This oversight can have significant implications for the sustainability and inclusivity of economic growth.