AØKA08087U Advanced Development Economics - Macro Aspects

The course covers three broad themes:

Theme 1. The historical origins of comparative development

Accounting for the vast income differences we see across countries today requires a comprehensive understanding of the historical characteristics of the development process,  and of the differential timing of the take­off to sustained growth (or the Industrial Revolution that took place about two centuries ago in the Western world) in particular. Given that not all countries have embarked on a trajectory of sustained growth at the same time, and that some countries have not even taken-off to a path of sustained development yet, visible gaps in income and productivity have emerged in the course of history. This has essentially shaped the contemporary pattern of comparative development that we aim to study in this course. Therefore, in the first lectures will discuss the forces that have kept economies in a state of stagnation for the bulk of human history and, by extension, how economies are ultimately released from stagnation.

Theme 2. Fundamental determinants of productivity

2A. Climate and geography

2B. Culture

2C. Institutions

In this part of the cours we ask why haven’t all countries taken off at the same time? Or, put differently, why did the Industrial Revolution not diffuse rapidly across the world as a whole? Why do some countries that have taken­off, have not managed to catch­up? And why have many countries have still not taken off yet?

At the proximate level, answers by existing growth models (such as the Solow­Swan model and extensions) suggest that some countries have simply not been able to accumulate enough (physical and human) capital, adopt new ideas and technologies, and ensure a high degree of macro efficiency as others. But then again, why is that? If policy is part of the story, why do some countries apparently impose growth hampering policies? If low savings are part of an answer, why do citizens of some countries display more "thriftiness" and willingness to save than citizens of other countries? Etc.

This part of the course relies on a recent body of research that seeks an answer in aspects related to climate/geography, culture, and Institutions, understood as countries’ fundamental dimensions or characteristics. Differences in these three broad dimensions are critical in understanding both the differential timing of the take­off and the post take­off different economic trajectories that countries embark on during their path to development.

Our study and discussion of the existing literature in this part of the course will also reveal questions that have played out an important role in the macro discussion of development, and in many cases are still open and the subject of on­going research and debate. Examples of these questions are: Does greater longevity lead to higher income? Do cultural differences matter? Are the formal rules of the game of an economy (e.g.., property rights protection) important to growth once we take into account that the informal rules of the game differ across countries (e.g., social norms, values, cultural aspectds like generalized trust, differentlial valuation of skills and wealth, etc)?

Theme 3. Policy debates

By the end of the course we will explore recent or relevant policy debates about our main topic. Examples of these debates are the effectiveness of development policy tools like foreign aid, the role for active state intervention in the process of economic development, and the causes and consequences of income inequality in the developing world.