Economic Growth and Development [562216] Professor: Dr. Fernando Sánchez-Losada Department: Economic Theory Department Course 2013-2014 (4 th term) Contents The following syllabus is an overview of the different engines of economic growth. It will not be completely done in the course, but only those themes previously chosen by the professor. Part I. Can we grow without growth of the number of workers if the technology has Constant Returns to Scale? Accumulation of factors 1. Human capital 1.1. Arrow and learning-by-doing 1.2. The two-sectors model of Uzawa-Lucas 1.3. Education and altruism 1.4. Application: from Malthus to Uzawa-Lucas 1.5. Application: from an agricultural economy to an urban economy 2. R+D: Research and Development 2.1. Romer and the goods variety 2.2. Jones and the scale effects 2.3. Grossman and Helpman and the quality ladder 2.4. Aghion and Howitt and the creative destruction of Schumpeter
3. Capital intensification 3.1. R+D oriented to capital deepening 4. Institutions or social capital: their influence on the accumulation of factors 4.1. Hall and Jones and the growth differences among countries Part II. Can we grow without growth of the efficiency units of labor? From Constant Returns to Scale to Increasing Returns to Scale at the aggregate level through the accumulation of some production factor 5. Capital externalities 5.1. The model of Romer 5.2. Absolute or per capita externalities? 6. Productive public expenditure 6.1. The model of Barro 7. TFP: generalization of the capital externalities and the Ak model 7.1. Human capital externalities and the Ak model 7.2. Poverty traps 8. TFP: Inada conditions and substitution capital-labor 8.1. Inada conditions 8.2. Substitution capital-labor and Inada conditions
Part III. Can we go from Constant Returns to Scale to Increasing Returns to Scale at the aggregate level without the accumulation of any production factor? Competition and firms 9. Industrial structure 9.1. Returns to specialization and monopolistic competition 9.2. Competition and the number of firms as the engine of growth 9.2.1. Monopolistic competition in intermediate goods 9.2.2. Monopolistic competition in final goods Part IV. Can we grow more than our neighbor? Total Factor Productivity and production factors 10. TFP and production factors 10.1. TFP and physical capital 10.2. TFP and firms' size 10.3. TFP and labor 10.4. TFP and structural change 10.5. TFP and genetic diversity
Bibliography 1 Unit 1 Arrow, K.J. (1962) The Economic Implications of Learning by Doing, Review of Economic Studies, 29: 155-173. Galor, O. and Moav, O. (2006) Das Human Kapital: A Theory of the Demise of the Class Structure, Review of Economic Studies, 73: 85-117. Galor, O. and Weil, D.N. (2000) Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond, American Economic Review, 90: 806-28. Glomm, G. and Ravikumar, B. (1992) Public versus Private Investment in Human Capital: Endogenous Growth and Income Inequality, Journal of Political Economy, 100: 818-34. Lucas, R.E. (1988) On the Mechanics of Economic Development, Journal of Monetary Economics, 22: 3-42. Lucas, R.E. (2004) Life Earnings and Rural-Urban Migration, Journal of Political Economy, 112: S29-59. Sánchez-Losada, F. (2000) Growth Effects of an Unfunded Social Security System When There Is Altruism and Human Capital, Economics Letters, 69: 95-99. Sánchez-Losada, F. (2004) Growth Effects of Fiscal Policy in Presence of Altruism and Human Capital, Annales d Économie et de Statistique, 73: 53-61. 1 The basic articles that the students should read are in black.
Unit 2 Aghion, P. and Howitt, P. (1992) A model of Growth through Creative Destruction, Econometrica, 60: 323-351. Grossman, G.M. and Helpman, E. (1991) Quality Ladders in the Theory of Growth, Review of Economic Studies, 58: 43-61. Jones, C.I. (1995) R&D-Based Models of Economic Growth, Journal of Political Economy, 103: 759-784. Jones, C.I. (1999) Growth: With or Without Scale Effects?, American Economic Review, 89:139-144. Kremer, M. (1993) Population Growth and Technological Change: One Million B.C. to 1990, Quarterly Journal of Economics, 108: 681-716. Peretto, P.F. (1998) Technological Change and Population Growth, Journal of Economic Growth, 3: 283-311. Peretto, P.F. and Connolly, M. (2007), The Manhattan Metaphor, Journal of Economic Growth, 12: 329-50. Romer, P. (1990) Endogenous Technological Change, Journal of Political Economy, 98: S71-S102. Young, A. (1998) Growth without Scale Effects, Journal of Political Economy, 106: 41-63.
Unit 3 Givon, D. (2006) Factor Replacement versus Factor Substitution, Mechanization and Asymptotic Harrod Neutrality, mimeo, Hebrew University. Peretto, P.F. and Seater, J.J. (2007) Factor-Eliminating Technical Change, mimeo, Duke University. Zuleta, H. (2008) Factor Saving Innovations and Factor Income Shares, Review of Economic Dynamics, 11: 836 851. Unit 4 Bisin, A. and Verdier, T. (2001) The Economics of Cultural Transmission and the Dynamics of Preferences, Journal of Economic Theory, 97: 298-319. Hall, R.E. and Jones, C.I. (1999) Why Do Some Countries Produce So Much More Output Per Worker Than Others?, Quarterly Journal of Economics, 114: 83-116. Palacios-Huerta, I. and Santos, T.J. (2004) A Theory of Markets, Institutions, and Endogenous Preferences, Journal of Public Economics, 88: 601-627.
Unit 5 Romer, P. (1986) Increasing Returns and Long Run Growth, Journal of Political Economy, 94: 1002-1037. Unit 6 Aschauer, D. (1989) Is Public Expenditure Productive?, Journal of Monetary Economics, 23: 177-200. Barro, R.J. (1990) Government Spending in a Simple Model of Endogenous Growth, Journal of Political Economy, 98: 103-125. Barro, R.J. and Sala-i-Martin, X. (1990) Public Finance in Models of Economic Growth, Review of Economic Studies, 59: 645-661. Eicher, T. and Turnovsky, S.J. (2000) Scale, Congestion and Growth, Economica, 67: 325-346. Unit 7 Azariadis, C. and Drazen, A. (1990) Threshold Externalities in Economic Development, Quaterly Journal of Economics, 105: 501-526. Rebelo, S. (1991) Long-Run Policy Analysis and Long-Run Growth, Journal of Political Economy, 99: 500-521.
Unit 8 Jones, L.E. and Manuelli, R.E. (1990) A Convex Model of Equilibrium Growth: Theory and Policy Implications, Journal of Political Economy, 98: 1008-1038. Klump, R. and de La Grandville, O. (2000) Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions, American Economic Review, 90: 282-291. Klump, R. and Preissler, H. (2000) CES Production Functions and Economic Growth, Scandinavian Journal of Economics, 102: 41-56. Unit 9 Cardona, D. and Sánchez-Losada, F. (2007) Cost-Based Models of Economic Growth, WP 179, Universitat de Barcelona. Peretto, P.F. (1999) Cost Reduction, Entry, and the Interdependence of Market Structure and Economic Growth, Journal of Monetary Economics, 43: 173-195. Unit 10 Banerjee, A.V. and Moll, B. (2010) Why Does Misallocation Persist?, American Economic Journal: Macroeconomics, 2:189-206.. Galor, O. and Ashraf, Q. (2012) The Out of Africa Hypothesis, Human Genetic Diversity and Comparative Development, American Economic Review, forthcoming.
Hsieh, C.-T. and Klenow, P.J. (2009) Misallocation and manufacturing TFP in China and India, Quarterly Journal of Economics, 124:1403-1448. Ngai, L.R. and Pissarides, C.A. (2007) Structural Change in a Multisector Model of Growth, American Economic Review, 97: 429-443. Raurich, X., Vilalta, M. and Sánchez-Losada, F. (2012) Knowledge Misallocation and Growth, mimeo. Books a) Acemoglu, D. Introduction to modern economic growth, Princeton University Press, 2009. b) Aghion, P. and Howitt, P. Endogenous Growth Theory, MIT Press, 1998. c) Barro, R. and Sala-i-Martin, X. Economic Growth, 2ª ed., McGraw-Hill, 2004. d) Sala-i-Martin, X. Apuntes de crecimiento económico, 2ª ed., Antoni Bosch, 2000.
Knowledge evaluation Assistance to class (80% at least) is required to be evaluated. The evaluation of the student is divided in two compulsory parts: 1) A presentation in class of one article in small groups. 2) A homework consisting in applying the knowledge acquired in class to a theme chosen by the student. For example, if I like health, Fernando will give me 2 or 3 papers of health and growth. Then, I will read them, write the strong and weak points of the papers and, finally, I will propose a new idea and try to model it.