Economic Growth (Winter 2001)
João Ejarque
(Joao.Ejarque@econ.ku.dk)
(www.econ.ku.dk/okoje)
Required: Barro and Sala-I Martin: Economic Growth Theory
This is the main textbook for the course. I expect us to cover at least chapters 1 through 8. Useful
reading for the course is Chad Jones's Introduction to Economic Growth. This is a very easy
introductory book, which gives a good overview of a lot of growth issues.
The main object of the course is the study of what factors affect output levels versus growth rates.
The classic growth engine is capital accumulation. However, technology is usually assumed to have
diminishing returns. Therefore in the basic growth model (Solow Model) income per capita does
not grow (population growth is usually exogenous so it is not use accumulating capital too fast).
Solutions to this involve having another production factor growing. First we usually postulate
exogenous technological progress. Then we look to endogenize it via either human capital
accumulation or via endogenous research actions. In any case we will have another stock (other
than capital) like technology or human capital growing.
We will also address models and current issues in some topics such as natural resources, financial
intermediation, open economy, inequality, technology transfer, corruption and others.
Evaluation will consist of a final exam. In the winter 2000 course, students gave an in-class
presentation of a paper, but that was only possible because the class was small. This year, the
expectation is of a bigger class, and we may try a different exercise like a referee report. Students
are encouraged to seek the advice of their colleagues that took the previous course with me.
You can find out what the students of the winter 2000 class thought of the course, and also how I
think their comments will make the 2001 course a much better one, one my website.
www.econ.ku.dk/okoje.
Syllabus
This is a guideline. The first 8 weeks of class (roughly) have a baseline curriculum which has to be
covered in this course, namely the Solow model and basic models of endogenous growth (AK
model, Lucas and Human Capital, Romer and Love of Variety, Creative Destruction). The topics
section has more flexibility and will be subject to discussion in class. In the winter 2000 class we
went into some detail on Technology Transfer and Inequality and Redistribution. These topics will
be covered less deeply this year to free time for other topics such as financial intermediation which
this year will be covered in some detail, and corruption and property rights (we will be able to
discuss Italy and Russia), which I think are very exciting topics. Not all topics will be covered and
not all papers on this syllabus will be covered either, but this syllabus should provide an idea of the
reading material. Some of the papers on this reading list are quite advanced and only greatly
simplified versions will be discussed in class, so you should not feel intimidated by them.
Required Textbook: Barro and Sala-I Martin (B&SM), Endogenous Growth
Suggested Reading: Charles Jones, Introduction to Economic Growth, 1998, W.W. Norton
I - Preliminaries and Basic Models (4 Weeks)
Hamiltonians and Lagrangeans
Solow Model
Basic model with no growth. Assumptions and implications. Obtaining growth with exogenous
technological progress. AK models: eliminating diminishing returns to capital. Linear models.
Ramsey Model
Basic planner's problem. Lagrangeans and Transversality condition.
Decentralized Ramsey model. Learning by doing as an Externality. AK models. Pollution.
Human Capital and Lucas 1988
Human capital. Linear models.
Readings
Barro, R.J., Determinants of Economic Growth, pages 1-8, (1997), MIT press
Mankiw, Romer and Weil, A Contribution to the empirics of economic growth, Quarterly Journal of
Economics 107, pages 407-438, (1992)
Lucas, R.E., On the mechanics of economic growth, Journal of Monetary Economics, (1988)
Jones, C. (1997), On the Evolution of the World Income Distribution, Journal of Economic
Perspectives
Hall and Jones, Why do some countries produce so much more output than others, QJE (1999)
Pollution and Learning by Doing
Stokey (1998), "Are there limits to growth?" International Economic Review.
II - Endogenous Growth, Scale Effects (3 weeks)
Love of Variety
Romer. Solow Equivalent. Scale effects.
Population (scale effects)
Michael Kremer's model.
Readings
B&SM, Chapter 6
Charles Jones, Chapters 5, 6
Kremer, M., Population Growth and Technological Change: One million B.C. to 1990, QJE 1993
Jones, C. (1999). Growth: With or Without Scale Effects? AER papers and proc's, May, 139-144.
Palivos and Yip (1993), Optimal Population Size and Endogenous Growth, Economics Letters 41,
107-110
III - Creative Destruction Model (2 weeks)
Basic Schumpeter Model.
Trade, Learning by doing, Externalities, Government
Readings
B&SM, Chapter 7.
Aghion and Howitt (AH), Endogenous Growth Theory, 1998, MIT Press. Chapters 2 and 3.
Peter Howitt, Endogenous Growth and Cross country income differences. (2000)
Part III (6 weeks) Topics
Inequality and Redistribution (1 week)
Alesina and Rodrik, (1994) "Distributive Politics and Economic Growth", The Quarterly Journal of
Economics, 465-490
Dalgaard, Hansen and Larsen, 2000, manuscript, University of Copenhagen
Technology Transfer (1 week)
Krugman (1979), A model of Innovation, technology transfer, and the world distribution of income.
Journal of Political Economy.
Barro and Sala-I-Martin, (1999), European Economic Review
Basu and Weil (1998), Appropriate Technology and Growth, The Quarterly Journal of Economics
Zeira, J., (1998), Workers, Machines, and Economic Growth, The Quarterly Journal of Economics
Financial Intermediation, Bubbles, Stock markets (2-3 weeks)
King, R. and Levine, R. (1993), Finance and Growth, The Quarterly Journal of Economics, 717737.
Gilles Saint-Paul, (1992) "Technological Choice, Financial Markets and Economic Development",
European Economic Review 36, 763-781.
Greenwood and Jovanovic (1990), Financial development, growth, and income distribution. Journal
of Political Economy, 1076-1107.
Acemoglu and Zillibotti (1998), Was prometeus unbound by chance? Journal of Political Economy,
Chari, Kehoe and McGrattan (1997), The Poverty of Nations, FRB Minneapolis
Corruption and Property Rights (1 week) (New topic, to be covered for sure)
Overlapping Generations Models (1/2 week) (Probably not covered in this course)
Barro and Sala i Martin , pages 128-137
Galor and Zeira, Income Distribution and Macroeconomics, Review of Economic Studies, 1993
Jones and Manuelli (1997), The sources of growth, Journal of Economic Dynamics and Control,
Chapter 7.
January 27, 2001
João Miguel Ejarque