AØKA08087U Advanced Development Economics - Macro Aspects

The course covers three broad themes:

Theme 1. The historical origins of comparative development

It is increasingly understood that it is impossible to account for the vast income differences we see across countries without an understanding of the differential timing of the take_off to sustained growth, which occurred first some two hundred years ago in the Western world. This event is sometimes referred to as the Industrial Revolution. As all countries have not embarked in a trajectory of sustained growth at the same time, income gaps emerged, thus shaping contemporary comparative development. This part of the course will therefore discuss the forces that have kept economies in a state of stagnation for the bulk of human history and, by extension, how economies ultimately are released from stagnation.

Theme 2. Fundamental determinants of productivity

2A. Climate and geography

2B. Culture

2C. Institutions

Why haven’t all countries taken off at the same time? Put differently, why did the Industrial Revolution not diffuse rapidly across the world as a whole? At the same time, why have some countries, post take_off, not manage to catch_up? And why have some not taken off yet?

At the proximate level, the answer is suggested by existing growth models (such as the Solow_Swan model and extensions): some countries are simply not able to accumulate capital (physical and human), adopt new ideas, and ensure a high degree of macroeconomic 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" than citizens of other countries? Etc.

This part of the course discusses a recent body of literature that seeks an answer in slow_moving country specific characteristics: Climate/Geography, Culture, and Institutions. Differences in these three broad dimensions are critical in understanding both the differential timing of the take_off and the post take_off different economic trajectories.

Our journey through the literature will also reveal important debates, which have played out an important role – and, in many cases, are still on_going – such as: Does greater longevity lead to higher income? Do cultural differences matter? Are the formal rules of the game of an economy (i.e., property rights protection) important to growth once we take into account that the informal rules of the game differ across countries (i.e., social norms and values ; dimensions like trust, cultural valuation of skills and wealth and so forth)?

Theme 3. Policy debates

Towards the end of the course we will explore recent or relevant public debates about our main topic – for example the effectiveness of development policy tools like foreign aid, or the causes and consequences of income inequality in the developing world.