- Domar presented his growth model in his pioneer work expansion and employment in 1947.
- Domar’s growth model addresses itself to the question as to what should be the rate of growth of investment so that the rate of growth of income coincides with the rate of growth of productive capacity.
- In short, Domar’s Model is an attempt to determine the rate at which investment purchasing must increase in an economy, if full- employment levels of production are to be maintained.
- According to Domar, investment raises productive capacity on the one hand and on the other hand it raises total demand in terms of total income. Productive capacity can be optimally utilised only if there is equivalent demand for the goods produced. That is, for a state of equilibrium in the economy, it is required that total supply (or productive capacity) equals total demand (or income).
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