Steady state (macroeconomics)

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The steady-state is a condition of the economy in which output per worker (Productivity of labour) and capital per worker (Capital intensity) do not change over time. This is due to the rate of new capital production from invested savings exactly equalling the rate of existing capital depreciation. Exogenous growth models show how economies will naturally tend to a steady-state. The steady-state is generally associated with the Nobel Prize-winning economist Robert Solow, who created the Solow Model in 1956.

In an economy without technological progress, the state of the economy where output and capital per worker are no longer changing. In an economy with technological progress, the state of the economy where output and capital per effective worker are no longer changing.

One way to break out of a steady-state is with the adoption of new technology that improves marginal productivity. This assumes that it is necessary or even desirable to do so.