EconomicGrowthI-PrincetonUniversityPress.ppt

Questions for discussion What is the importance of diminishing marginal returns in the neoclassical model? How do other models deal with the possibility of diminishing returns? Explain the effect of (i) an increase in savings ratio (ii) a rise in population growth and (iii) an increase in exogenous technology growth in the neoclassical model. What is the golden rule? Can you think of any countries that have broken the golden rule? Endnotes References Boltho, A. and G. Toniolo (1999). The Assessment: The Twentieth Century-Achievements, Failures, Lessons. Oxford Review of Economic Policy 15(4): 1-18. Easterly, W. (2001). The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics. Boston, MIT Press. Swan, T. (1956). Economic Growth and Capital Accumulation. Economic Record 32: 344-361. Jones, C. (1998) Introduction to Economic Growth, (W.W. Norton, 1998 First Edition, 2002 Second Edition). Carlin, W. and D. Soskice (2006) Macroeconomics: Imperfections, Institutions and Policies, Oxford University Press. Models of Economic Growth A Outline: Because this area is complex and mathematical there are two files of slides for this topic Lecture A Introduction – trends in growth Neoclassical growth models Lecture B Endogenous growth models The convergence debate Below are slides for lecture A See next file for lecture B Introduction Need to define ‘economic growth’ (in book this is growth in GDP per capita, not GDP growth). Some background on history of economic growth – including own country data Also, worthwhile to stress importance of small differences in growth rates e.g. 2% growth per year ? GDP p.c. increases 7.4 fold in 100 years 0.6% ? GDP per capita increase 1.8 times in 100 .... 72 / growth rate = no. of years to double, hence China’s 10% p.a. implies 7.2 years The very long run Growth of GDP per capita (average annual percentage changes) 1500-1820 1820-1900 1900-2000 OECD 1.2 2.0 Non-OECD 0.4 0.6 World 0.04 0.8 1.9 Source: Boltho and Ton