Intro to Growth Sang Yoon (Tim) Lee Toulouse School of Economics 08:00-09:30, Jan 9, 2018 last updated: December 19, 2017
Why Should You Care? Real Wages in the Great Recession? Source: http://andolfatto.blogspot.de/2010/11/ 2005-real-wage-shock.html
But... These stats are alarming But compared to world poverty, a U.S. recession is nothing...
Clinic in Chiwosya, Malawi
Delivery Room...
Former Girls Hostel
Bathroom
Funny Children
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.
Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): 30000 25000 20000 15000 10000 5000 0 0 500 1000 1500 2000 Western Europe Western Offshoots Latin America Asia Africa
Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): 30000 25000 20000 15000 10000 5000 0 0 500 1000 1500 2000 Western Europe Western Offshoots Latin America Asia Africa
Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): 30000 25000 20000 15000 10000 5000 0 0 500 1000 1500 2000 Western Europe Western Offshoots Latin America Asia Africa
Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): 30000 25000 20000 15000 10000 5000 0 0 500 1000 1500 2000 Western Europe Western Offshoots Latin America Asia Africa
Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): 30000 25000 20000 15000 10000 5000 0 0 500 1000 1500 2000 Western Europe Western Offshoots Latin America Asia Africa
Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): 30000 25000 20000 15000 10000 5000 0 0 500 1000 1500 2000 Western Europe Western Offshoots Latin America Asia Africa
Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): 30000 25000 20000 15000 10000 5000 0 0 500 1000 1500 2000 Western Europe Western Offshoots Latin America Asia Africa
Economic Growth in Historical Perspective Income per capita in world regions from 0 to 2000 (Maddison 2003): 30000 25000 20000 15000 10000 5000 0 0 500 1000 1500 2000 Western Europe Western Offshoots Latin America Asia Africa
The World at Night
World Today
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
World Inequality Breakdown
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 30 20 10 0-10 -20 0 20 40 60 80 100 GDP per capita relative to U.S.
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 30 20 10 0-10 -20 0 20 40 60 80 100 GDP per capita relative to U.S.
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 30 20 10 0-10 -20 0 20 40 60 80 100 GDP per capita relative to U.S.
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 30 20 10 0-10 -20 0 20 40 60 80 100 GDP per capita relative to U.S.
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... 3. DOES mean all other measures are more or less made-up Sorry, but forget about subjective wellness measures for this course
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
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
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
US GDP/capita, 1870-2005
GDP and Capital per Worker
Capital Share of Income
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
Average Years of Schooling
International Test Scores
Population Growth
Total Fertility Rate
Life Expectancies
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
Long-Run Growth and Demographic Change 3.5 2.5 1.5 All industrialized countries underwent the demographic transition. Population growth in world regions from 1500 to 2000 (Maddison 2003): 3 2 1 0.5 0 1500 1600 1700 1800 1900 2000 Western Europe
Long-Run Growth and Demographic Change 3.5 2.5 1.5 All industrialized countries underwent the demographic transition. Population growth in world regions from 1500 to 2000 (Maddison 2003): 3 2 1 0.5 0 1500 1600 1700 1800 1900 2000 Western Europe Western Offshoots
Long-Run Growth and Demographic Change 3.5 2.5 1.5 All industrialized countries underwent the demographic transition. Population growth in world regions from 1500 to 2000 (Maddison 2003): 3 2 1 0.5 0 1500 1600 1700 1800 1900 2000 Western Europe Western Offshoots Asia Africa
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
NEXT LECTURE Solow Growth Model, a little bit more of Math :-)