Intro to Growth. Sang Yoon (Tim) Lee. 08:00-09:30, Jan 9, last updated: December 19, Toulouse School of Economics

Transcription

1 Intro to Growth Sang Yoon (Tim) Lee Toulouse School of Economics 08:00-09:30, Jan 9, 2018 last updated: December 19, 2017

2 Why Should You Care? Real Wages in the Great Recession? Source: real-wage-shock.html

3 But... These stats are alarming But compared to world poverty, a U.S. recession is nothing...

4 Clinic in Chiwosya, Malawi

5 Delivery Room...

6 Former Girls Hostel

7 Bathroom

8 Funny Children

9 Economic growth since the Industrial Revolution The biggest economic phenomena in history was NOT 1. the Great Depression 2. either of the World Wars 3. Rise of China or East Asia in general These are all peanuts compared to the industrial revolution.

10 Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): Western Europe Western Offshoots Latin America Asia Africa

11 Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): Western Europe Western Offshoots Latin America Asia Africa

12 Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): Western Europe Western Offshoots Latin America Asia Africa

13 Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): Western Europe Western Offshoots Latin America Asia Africa

14 Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): Western Europe Western Offshoots Latin America Asia Africa

15 Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): Western Europe Western Offshoots Latin America Asia Africa

16 Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): Western Europe Western Offshoots Latin America Asia Africa

17 Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): Western Europe Western Offshoots Latin America Asia Africa

18 The World at Night

19 World Today

20 History of Economics So we ll learn about Growth, not only because it matters but also because: 1. That s what macroeconomics, if not economics, began with anyway (what was the title of Adam Smith s book?) 2. Modern research in all other subfields of macro, like Business Cycles and Inequality, take the growth model as the foundation of their theories 3. Illustrates how modern macro research is built on micro principles Also, analyzing cross-country growth gives us more than half of inequality

21 World Inequality Breakdown

22 Economic Growth in the Post-War Period Income per capita and growth relative to U.S. in 1960: 40 tive GDP per capita Change in relat GDP per capita relative to U.S.

23 Economic Growth in the Post-War Period Income per capita and growth relative to U.S. in 1970: 40 tive GDP per capita Change in relat GDP per capita relative to U.S.

24 Economic Growth in the Post-War Period Income per capita and growth relative to U.S. in 1980: 40 tive GDP per capita Change in relat GDP per capita relative to U.S.

25 Economic Growth in the Post-War Period Income per capita and growth relative to U.S. in 1990: 40 tive GDP per capita Change in relat GDP per capita relative to U.S.

26 Putting Things into Context: GDP Macroeconomists usually measure wellness by GDP 1. There are other measures, but less objective 2. Doesn t mean we think GDP is everything DOES mean all other measures are more or less made-up Sorry, but forget about subjective wellness measures for this course

27 More on GDP Short term vs Long term - e.g. Business cycles vs Development Real vs Nominal: - over time: GDP Deflator cross-country: PPP GDP Total GDP vs GDP per capita - (size, political power) vs (well-being, living standards) Short-run and Nominal (monetary) economics in 2nd part of class by Stephane Dupraz

28 Growth vs Development In this class by Growth we refer to Growth regularities in industralized countries Income (or GDP per capita) differences across countries post Industrial Revolution - i.e., ignoring long run growth paths In contrast, by development we usually mean Long run evolution of income levels and cross-country income differences In particular, including both before and after industrialization We won t differentiate between the two in this class

29 Growth regularities Near constant growth Solow growth model (this afternoon): implies conditional convergence This is why in most industralized countries, business cycles or other issues (like inequality) receive more attention GDP and capital per worker Constant capital share of income GDP and Demographics

30 US GDP/capita,

31 GDP and Capital per Worker

32 Capital Share of Income

33 What Else? ( less regular ) What else explains cross country differences, than capital? Extensions of the basic model, most of this course! e.g. schooling and demographic differences

34 Average Years of Schooling

35 International Test Scores

36 Population Growth

37 Total Fertility Rate

38 Life Expectancies

39 Development - time series evidence INDUSTRIAL REVOLUTION Economic miracles? Economic and demographic changes: no time for this... Competition and endogenous technological growth: end of this course

40 Long-Run Growth and Demographic Change All industrialized countries underwent the demographic transition. Population growth in world regions from 1500 to 2000 (Maddison 2003): Western Europe

41 Long-Run Growth and Demographic Change All industrialized countries underwent the demographic transition. Population growth in world regions from 1500 to 2000 (Maddison 2003): Western Europe Western Offshoots

42 Long-Run Growth and Demographic Change All industrialized countries underwent the demographic transition. Population growth in world regions from 1500 to 2000 (Maddison 2003): Western Europe Western Offshoots Asia Africa

43 Preview of Semester Industrialized countries have near constant growth In this world, growth is the sum of many inputs: capital, labor, population: education, health: Solow Model Human Capital Where does capital come from..? Ramsey-Cass-Koopmans Model Technology exogenous or endogenous? Romer Model and variants

44 NEXT LECTURE Solow Growth Model, a little bit more of Math :-)