History of Economic Growth Theory: a
Roadmap
1. Smith, Ricardo, Malthus and Mill had little hope
for sustained growth.
2. Forgotten for a long while. Ill attempted in UK
(Harrod and Domar).
3. Robert
Steady State Analysis
Steady State: k = 0
Solve for steady state 0 = s (k)(n + )kk
=
s n + 1 1
Steady state output per worker y= s n+ 1
Steady state output per worker depends positively
on the sa
Data
How do incomes and growth rates vary across
countries.
Summers-Heston data set at Penn: follow 104
countries over 30 years.
Focus on income (GDP) per worker.
Measure income (GDP) using PPP-ba
Growth Accounting
Growth Accounting
Output is produced by inputs capital K and labor L,
in combination with the available technology A
Want: decompose the growth rate of output into the
growth rate
Macroeconomics and the Supply Side
Net wealth position of the US: difference between
what the US is owed and what it owes to foreign
countries.
Capital account balance: equals to the change of the
ne
The Neoclassical Growth Model and Growth
We can take the absence of growth as a positive
lesson.
Illuminates why capital accumulation has an inherit
limitation as a
source of economic growth:
1. Sov
Neoclassical Growth Model
Models and Assumptions I
What is a model? A mathematical description of the
economy.
Why do we need a model? The world is too
complex to describe it in
every detail. A mode
Introduction to Growth Theory
Growth Theory
I do not see how one can look at figures like these
without seeing them as representing possibilities. Is
there some action a government could take that
wou
Basic Assumptions of the Neoclassical
Growth Model
1. Continuous time.
2. Single good in the economy produced with a
constant technology.
3. No government or international trade.
4. All factors of pro