Lecture 7 0420

Lecture 7 0420 - Lecture 7 - Moving Beyond Solow 4/20/10...

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Lecture 7 - Moving Beyond Solow 4/20/10 Business Today o Two sector models Labor surplus model Neoclassical two sector model o Increasing returns and poverty traps Thursday o Big picture view of evolution of development of economic policy Washington Consensus (What is it? How does it fit into our discussion?) o Chapter 5 PRL: Skim Sections this week o Easterly, Ch. 8: “Matches, Leaks and Traps” Think more seriously about how knowledge is generate Innovation is different from production of capital goods Characterized by externalities – leaks Next HW will be assigned next week Two Sector (Structuralist) Models Focus of Classical Growth Models o Savings, investment & accumulation of capital; o Single sector Two sector models o Growth requires structural transformation of economy o Shift resources from agriculture (traditional) to industry (modern) Harry Truman’s fourth point – changing structure of undeveloped economies o Part of “structural” view of development o Growth occurs via “uneven” development Some sectors (groups) grow rapidly Others grow more slowly, stagnate, or even shrink o Understanding structural change requires disaggregated approach Structural Transformation ( graph ) Agricultural labor shares and GNP per capita, 1990 o How does this tell a dynamic story and what is that story? o
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Lecture 7 0420 - Lecture 7 - Moving Beyond Solow 4/20/10...

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