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TRANSCRIPT
Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Introduction to Economic Growth: Data andTheory
Pedro de Araujo
Department of Economics & BusinessColorado College
March 5, 2020
EC302 - (Block 6 - 2020) Introduction to Economic Growth 1/23
Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
Three Important Questions
1 What causes sustained increases in living standards?
2 Can policy affect growth paths?
3 Are there limits to growth?
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
World’s Real GDP per person Distribution 1960
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
World’s Real GDP per person Distribution 2000
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Growth PathsConvergence
One More Question
1 Why are some countries catching up, while others are not?
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
What Determines Growth?
The Solow Growth Model (Solow, 1957)
1 Output determined by labor input, physical capital -infrastructure (machines, buildings, roads, etc...), andtechnology (residual parameter).
2 Hence, growth of output also depends on the growth rate ofall three inputs.
3 All inputs affected by policy - population growth, savings rate,investments in research and development (broadly defined).
4 However, only technical progress can grow without bounds →the cause of sustained growth.
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
What determines technology?
Accounting for the Solow Residual:
1 Human Capital Accumulation (Education)
2 Health Status of Population
3 Openness to Trade
4 Research and Development
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
Education (Human Capital)
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
Health
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
DEEPER CANDIDATES
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
Fundamental Causes
1 Geography:Societies of warmer climates are less productive (Montesquieu(1748), Marshall (1890))Warmer climates reduce agricultural productivity (Myrdal(1968), Diamond (1997))Warmer climates increase the propagation of diseases (Sachs(2000), Bloom and Sachs (1998))
2 Culture:Different societies have distinct cultures because of differentshared experiences and religion (Weber (1930)).
3 Institutions (Rules of the Game):Good institutions (inclusive economic and political) createprocesses (rule of law and political process) that generatesvirtuous cycles (Acemoglu and Robinson (2012)).Examples: the Korean experiment and the colonial experiment(reversal of fortune)
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
Geography
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
Institutions
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
Exogenous GrowthEndogenous Growth
Institutions: Koreas
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Growth vs. Business CyclesEconomic Growth Facts
Growth Theory
References
Acemoglu, Daron, “Introduction to Modern EconomicGrowth,” Princeton Press, 1st ed., 2009
All other references found in above book
Barro, Robert J.: “Macroeconomics: A Modern Approach,”Thomson South-Western, 8th ed., 2008
Williamson, Stephen D.: “Macroeconomics,” PearsonAddison-Wesley, 5th ed., 2013
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