ECGA 6470: Economic growth and development                         Spring 2012

Course Description    Requirements   Course Calendar

 

PhD texts:   Agénor, Pierre-Richard (2004) Economics of Adjustment and Growth, 2nd ed (HUP)  0674015789

Barro, R. & J. Sala-i-Martin (2004) Economic Growth 2nd ed (MIT Press) 0262025531

Acemoglu, Daron (2008) Introduction to Modern Economic Growth, Princeton University Press

                (chapter 1, chapter 2, chapter 5 and an epilogue available on this page).

Novales, Alfonso,  Esther Fernández  and Jesús Ruíz (2010)  Economic Growth: Theory and Numerical Solution Methods

                [Paperback 3642111327 ]

 

Masters level texts:

Jones, Charles I. (2001) Introduction to Economic Growth 2nd ed (W.W. Norton 0393977455)

Aghion, P and P. Howitt (2009) Economics of Growth (MIT Press, Boston)  0262012634   

 

Recommended (some required reading):

Aghion, P and P. Howitt (1998) Endogenous Growth (MIT Press, Boston) 0262011662

Barro, Robert J. (1998) Determinants of Economic Growth (MIT Press, Boston).

Lucas, R.E. (2002) Lectures on Economics Growth (Harvard Univ. Press)

Parente, S. and E. Prescott (2002) Barriers to Riches (paperback) MIT Press

Rodrik, Dani (2003) In Search of Prosperity (Princeton University Press) 0691092699

Romer, David (2005) Advanced Macroeconomics (chapters 1-3) 

 

Course Description: Why do people living in some countries grow rich, while others remain poor? This is the main question growth and development economists try to answer. The answer used to be somewhat discouraging: institutions shape and limit the growth of countries, and they have for some 200 years. Today tables have turned somewhat and though still relatively poor, during the decade or so (3 decades in the case of China) the poor have been getting richer.  In particular, most African countries have begun to grow at respectable rates (see lecture notes) especially compared to their own recent history.  This course is about what caused this favorable shift toward more rapid growth, is the growth surge sustainable and are the poorest really benefitting from economic growth? Though World Bank just revised its outlook down, the 2008 financial crisis hit rich countries much harder than poor countries. The result of a closing of the gap in incomes between rich and poor.  China, Nigeria, Korea, India and Vietnam all managed to grow rapidly right through the recent crisis.  Even Argentina, Venezuela, Nigeria and the Philippines, historically problem growth countries, grew right through the recent downturn. In fact, developing countries have been growing faster than OECD countries for some time now, reducing world inequality and poverty. The first part of this course explores key theories of economic growth and some empirical evidence on long term growth and convergence.  The second part of the course turns to growth strategies including the role of education, trade and capital market openness and/or industrial policy in facilitating rapid growth. Recent growth booms in India and China were associated with both internal reforms and trade liberalization: which reforms were key to these growth miracles?  Finally, we turn to the political economy of growth, considering a number of recent arguments that make policy itself endogenous, stressing the role of inequality, institutions (property rights), geography and natural resource endowments in shaping governance and therefore long term growth performance of the least developed countries in particular.

Requirements: The essay based final and midterm account for 20% and 40% of the course grade. A number of problem sets (20%) and a country case study (20%) contribute the remaining 40% of the grade. The case study also serves as a final exam question, it has references and data you gather, but it is not quite a formal paper.  You can present your case study in class if you like for extra credit. After the midterm, a detailed country case study description will be distributed.  To reduce the weight of midterm and to prepare for the final students are also encouraged to present a brief, optional power point summary of their case study to the class for discussion and comments.


 

Topics-Lectures:  Part I Development and Growth: Theory and Evidence Poverty Traps—industrialization   Empirical Evidence on convergence    Introduction: Global crises and Poverty Income Convergence or Divergence?   Growth Models: Solow-Swan, AK-HD & R&D based Endogenous growth      Endogenous Growth I: Population/human capital  Endogenous Growth II: Technical change  Part II. Growth promoting Economic Policy:      Openness to Trade    Openness to Capital Flows     Financial Development      Poverty/Inequality Reduction     Macroeconomic Stability   Geography, Institutions

Reading/Topics: *required readings: **high priority  Journal Acronyms

Problem Set #1A   Problem Set #2  Three Growth Models handout   Barro’s AK Model with Government  

First week: read Jones Chapter 1-2 and Sachs et. al BPEA Ending Africa’s Poverty Trap pp. 121-31.

1.  Introduction: Growth Miracles and Poverty Traps

            Sachs et. al BPEA Ending Africa’s Poverty Trap pp. 121-31.

            Lucas, R.E. (2000) Macro for the 21st Century. JEP,14:1, Winter 2000 or Chapt 4 of .

            Jones 2nd ed. Chapter 1, Brad de Long (2000) Cornucopia      

            Agénor Chapter 10 pp. 411-30  *Barro & Sala-i-Martin Introduction and Chapter 1

            Lucas (2002) pp. 1-23 and pp. *251-253 “Making a Miracle

Case Study 1.1 Institutions vs. Geography: how rich countries became poor

            Acemoglu, Daron, Simon Johnson and James Robinson (2006) Understanding Prosperity and Poverty:

 Geography, Institutions and the Reversal of Fortune  NBER long version…  Acemoglu, D. (2003)

     Rodrik, Dani  (2003) “The Primacy of Institutions”  IMF Finance & Development   40,2, IMF, June 2003

Sachs, Jeffery (2003)  Institutions Matter, but not for everything (same issue of F&D)

Edison, Hal (2003)     

      Case Study 1.2 Is globalization good for the poor?

                Fischer, S.Globalization

  and its Challenges   AER, May 2004;

                Dollar & Kraay Spreading the Wealth  Foreign Affairs 

Dollar, David Is Growth Good for the Poor?, World Bank Working Paper, March 2000
World Bank, Pro Poor Growth in the 1990s   LatAm Virtuous circles

                Bhagwati, J “Anti-Globalization: why?  Stilitz, J. Globalization & Growth

                R. Rajan & Zingales (2003) Saving Capitalism…, book excerpt, Milken Institute Review

     Case Study 1.3: Is World Inequality & Poverty rising or falling? Lecture notes

2.  Three Growth Models: convergence or divergence? *Agénor Chapter 11

    *Barro(1997) Chapter 1  *Jones 2nd ed, Chapters 1-3          Problem Set #1A

     McCallum, B. (1996) Neoclassical vs. Endogenous Growth FRB of Richmond

     Sala-i-Martin 15 Years of Growth Theory Jones Chapts. 2,3  Romer, D. Chapts 1 & 3 

     Lucas, R.E. Macro for the 21st Century.. JEP, 14:1, Winter 2000.

                Pritchett, (1996) Divergence Big Time.  Lucas, R.E.(1988) "Mechanics of Development" JME,22,3-42.

                Solow, R. M. (1956) "Contribution to the Theory of Growth," QJE, 70, 65-94.

                Mankiw, Romer, and Weil, "Empirics of Growth," QJE, May,1992,107:2,407-38.

 3. Economics of poverty traps: Population, Industrialization and Market Structure  

    *Barro and Sala pp. 74-77 Sachs et. al BPEA Ending Africa’s Poverty Trap pp. 121-47.  

     *Krugman (1996) “The Fall and Rise of Development Economics”   Journal Acronyms

     *Murphy, K. Schleifer & Vishny (1989) "Industrialization & the Big Push" JPE, 97:5, 1003-27

      Robelo, S. (1992) “Growth in open economies” Carnegie-Rochester Public Policy Series, 36,5-46.

      Krugman, P. (1994) Counter-Counter Revolution In Development Theory, WBER

4. Empirical Evidence: Exogenous vs. Endogenous growth and convergence.

       *A&H—pp. 29-35, *B&SM Chapts 11,12 *Agénor Chapter 13)  

       Bosworth and Collins (2003)The Empirics of Growth: An Update” BPEA, No. 2.

Levine R. & D. Renelt (1992)"Cross-cty Growth Regressions," AER, Sept,84:2,942-63 [cd]

       *Barro, R. J. (1998) Determinates of Economic Growth Chapt 1. and TEAM pp. 60-69.

       *Sala-i-Martin, J. (1997) “I just ran four million regressions,” Columbia University

       *McGratten, E. (1998) “A Defense of AK Growth Models, FRBMQR, Fall,22:4, 13-27 [cd]

             Jones, C. “Time Series Tests of Endogenous Growth Models," QJE, May 1995, 110, 495-525

                Barro, Robert J., "Growth in a Cross Section of Countries," QJE, May 1991,106, 407-43.

                Barro, R.J. and X. Sala-i-Martin, "Convergence," JPE, 1992, 100 (2), 223,251.

                Easterly, W. et. al. (1994) "Good Policy or Good Luck?” JME

Case Study: Asian Growth: Miracle or not?  

WB Team Report Chapter 5 Krugman, P. “East Asian Miracle?”

I. Promoting Growth: Good policy or good (bad) luck?  Journal Acronyms

 5. Openness and Growth I : Trade and Growth

            Models: *Basu and Mcleod Terms of Trade Fluctuations and Economic Growth JDE, 1992

               *Sachs, Jeffery and Gallup (1998) Geography and Economic growth [cd]

Evidence: *Rodriguez and Rodrik. (2000) Trade Policy and Economic Growth: A Skeptics View"

*Warner, Andrew (2003) “Once more into the Breach, Reply to Rodriguez & Rodrik” CGD

                  Dollar, et. al. (2002) Trade Growth and Poverty (globalizers classified by growth in trade and tariff reduction)

  Sachs, Jeffrey D. & Andrew Warner. 1995. “Economic Reform and Global Integration.” BPEA (1):1-118.

processed, Kennedy School of Government, Harvard University [cd]

  Edwards, S, (1997) Openness and Growth: What do We Really Know?  EJ, 

                        Dollar, David (1992) Outward-Oriented Developing Economies Really do Grow More

Rapidly, Economic Development and Cultural Change, 523-43.

    Young, Alyn (1991) Learning by Doing and the Dynamic Effects of International Trade,QJE

                Baldwin, R. (2003) Openness and Growth A Survey

 

6. Openness and Growth II: Capital Mobility and Growth (Agénor Chapter 16)

    *Pierre-Olivier Gourinchas and Olivier Jeanne (2002)         Benefits of Capital Account Liberalization for Emerging Economies     Tornell, A, Westerman & Martinez (2004) The Link Between Financial Liberalization Growth And Crises    *Edwards, S (2000) Capital Mobility and Economic Performance, NBER, (cdrom)

   *De Gregorio (1998)  Financial Integration, Financial Development and Economic Growth (cd)

   *World Bank (2001) Capital Flows and Economic Growth, Global Dev. Finance Chapter 3

            Hausman, Ricardo and Eduardo Fernandez-Arias 2000 “Foreign Direct Investment: Good Cholesterol?”

 

7. Financial Development and Growth:

  *Levine, Ross (2003) More on finance and growth: more finance, more growth? Economic Review

St. Louis Federal Reserve Bank,

   *Levine Finance and Growth Slideshow World Bank  Ross Levine at RepEc

   *Levine, Ross (1997) Financial Development and Economic Growth JEL, XXXV,688–726

   Espinosa, M and W. Hunter (1994) Financial Repression & Development, Economic Review

Federal Reserve Bank of Atlanta, Sept/Oct.

   King, R. and R. Levine (1993)  "Finance, Entrepreneurship, & Growth"  JME, 32:3,

   Greenwood, J., & B. Jovanovic, "Financial Development & Income Dist," JPE, 5:1, 1990: 1076‑107.

   Bencivenga, V, & B. Smith (1991) "Financial Intermediation & Endog.Growth,"RES, 58,195-209          

   McKinnon, R. (1991) The Order of Economic Liberalization (Johns Hopkins Press).

   McKinnon, Ronald, Money and Capital in Economic Development, Brookings, 1973.

 

8. Poverty, Redistribution and Political Economy (see *Barro (1997) Chapter 2):

      Aghion & Williamson (2000) Growth Inequality and Globalization, Intro & Chapter 1   

A&W Part I, Inequality and Economic Growth, Aghion JEL Survey.

 *Barro, R Inequality and Growth in a Panel of Countries, June 1999.

       *Alesina and Perotti (1994) The Political Economy of Growth Survey, WBER (photocopy)

       Forbes, Kristen The Relationship between Inequality and Growth, MIT (AER 2001) 

       Benabou, Roland (1997) “Inequality and Growth” NBER Macroeconomics Annual 1997,

       Rodrik, D. (1997) Democracy and Economic Performance, processed, Harvard Univ.

       Rodrik, Dani (1998) “Growth Collapses” processed, Inequality and Growth Further Reading


9. Macroeconomic Stability and Growth (*Barro, Determinants of Growth, Chapter 3)

               Inflation and Growth—Further Reading 

     *Fischer,S. (1993) The Role of Macroeconomic Factors in Growth, JME, 32,485-512 [cd]

     *Easterly, William. The Lost Decades: Explaining Developing Countries' Stagnation 1980-1998

     World Bank, Development Research Group, Jan 2000, (forthcoming) presentation

     *Barro, R.(1990) Government Spending w/ Endogenous Growth, JPE,98,103-25[cdrom]

     Bruno, Michael, & W. Easterly (1998) "Inflation Crises & Long-Run Growth." JME 41:1:3-26

     DeGregorio, Jose (1993) Inflation, Taxation and L-R Growth, JME, 39,59-84.

     Easterly, W. and S. Rebelo (1993)  Fiscal Policy and Economic Growth, JME, 32, 417-58.]

     Easterly, William(1993)  How Much do Distortions affect Growth?  JME, 32, 187-212.    

 

10. Natural Resources, Foreign Aid and Economic Growth

     *IMF, WEO April 2003 Institutions & Growth Chapt. 3  Rodik *Getting institutions right: a primer

       Rodrik, Institutions Rule Finance & Development Issue  Institutions Rule: Longer paper

       Edison, H. How Strong are the links?   

       Sachs, J and  A. Warner (1995) Natural Resource Abundance and Growth HIID WP #517

 

14. Case Study Resources

  *Pritchet, Lant (2004) Socialist Star and Democratic…Growth Theory, Vietnam and the Philippines

            in Rodrik, D. ed. In Search of Prosperity (Princeton University Press). 

  *Rodrik, D. (2003) Growth Strategies (NBER working paper 10050) Boston, MA

   Radelet, et.al. (2003) MCA country selection process (CGD web site)

 

Reference & background reading (click to full list below):

Aghion, P. & J.Williamson (1998) Growth, Inequality & Globalization, Cambridge

Bhalla, Surjit (2002) Imagine There’s No Country, www.IIE.com (0-88132-348-9)

Ros, Jaime (2000) Development Theory & Economic Growth (U of Michigan Press)

World Bank, (2000) The Quality of Growth (QOG)

World Bank (1993) The East Asian Miracle (Oxford U Press-- or “TEAM)

Gylfason, Thorvaldur, 1997, Principles of Economic Growth (Oxford U Press, NY)