The course will analyse advanced macroeconomics models, with a special focus on growth and development. The empirical validity of these theories will be discussed.
Course outline :
The aim of the course is to examine the “new growth” or “endogenous growth” theories developed in the last 25 years, as well as the closely related literature on development.
The course consists of two sections. The first part will examine the seminal work in growth and economic development. We will study the various mechanisms that will result in sustained long-run growth -learning-by-doing, investments in infrastructure, education, and firms’ R&D decisions– and analyse the role played by externalities and increasing returns to scale. We will see that a crucial implication of these growth models is that the equilibrium growth rate is not socially optimal, and that a laissez-faire economy can grow either too slowly or too fast. We will also examine the causes of economic development, and why poverty traps may emerge. The explanations proposed include the theory of “the big push”, whereby increasing returns to scale can result in poverty traps and hence explain why certain economies remain underdeveloped. We will then address the role of “threshold effects” in education, their implications for development, and the role of the distribution of wealth.
The second part of the course will examine and several topics related to growth : the empirical evidence, the relationship between growth and inequality, recent views on the causes of the industrial revolution, and the role of institutions in development.