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What are the forces driving the growth process in the world economy? What are the sources of economic growth? What do the data tell us about the long-run growth? Will poor countries remain poor? This course studies these questions and investigates the proximate determinants of income per capita across time and space. We will cover the Solow-Swan growth model, endogenous growth, the two-sector model, and some applications pertaining to the role of technology, innovation policy, institutions, and the agricultural sector. Throughout this course, a particular emphasis is set on the interplay between theory and data so that students learn how economic theory can be used to understand the data, and how data can be used to test a theory.
The introductory lecture explains the concept of Gross Domestic Product (GDP) and how it is measured. In the second lecture, we then study some stylized facts on economic growth, its distribution across countries, and long-run trends. The third lecture focuses on the measurement of two key aggregate production factors, physical and human capital, and how they are statistically related to GDP. In particular, we investigate how much differences in GDP can be explained by physical and human capital, and how much is left unexplained and assigned to total factor productivity (TFP). The fourth and fifth lectures introduce the standard economic models that serve as stepping stones to understanding growth and development by describing the process of physical capital accumulation. Lecture 4 is devoted to the Solow-Swan growth model where households save and invest an exogenous fraction of income/output. There are two main results. The first is that growth through capital accumulation is only a transitory phenomenon and that in the long-run steady state growth must be driven by an exogenous force. The second lesson is that in a steady state, GDP and physical capital are jointly determined. Lecture 5 covers the Ramsey model, which is a refinement of the Solow model in the sense that households now make saving/investment decisions. The upshot of this lecture is that while capital accumulation is more involved, the major lessons from the Solow model remain intact. The last lecture discusses relevant avenues to understand the main driver of growth of development, TFP. We discuss two aspects. One is that across time, TFP can be best understood as an improvement of technological know-how that allows for more efficient use of production factors. A crucial feature is that technology is likely to be a non-rivalrous good and that the resulting positive externalities of innovation call for policy intervention. The other aspect concerns differences in TFP across countries. We argue that it is related to differences in how economies allocate production factors across sectors and firms. An important feature here is that, given some level of technology, resources may be more or less efficiently allocated, which in part depends on the institutional environment. Finally, if time allows we study the role of the agricultural sector for economic growth.
Language: English
Credits: 2 SWS / 3 ECTS |
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