ECON 798 Economic Growth Fall 2002 Professor:  Bruce Elmslie Phone: 862-3347 E-mail: bte@hopper.unh.edu Economic growth has always been the heart of economics.  One of the fundamental economic questions is how can a country increase its per capita income, and why are some countries so much better at it than others?   To bring the importance of such questions into a better focus, let’s take an example.  The difference between a 1% rate of growth and a 3% rate of growth may seem insignificant.  However, due to compounding, small differences in the rate of growth will quickly lead to vast differences in living standards.  Say a country had a per capita income in 1990 of $10,000.  By 2000, a 1% rate of growth brings that number to $11051.71, while a 3% rate of growth brings it to $13498.59.  This represents a difference of  22% over a mere 10-year period.  Now ask the same question for a 50-year period.  After 50 years, the 1% growth rate will result in a per capita income of 16487.21, while a 3% growth rate will generate an income of $44816.90!  That represents an income difference of 172%.  Once we start thinking about growth, it is difficult to think of anything else.  On the first page of a syllabus, these are just numbers.  But, for the people behind the numbers, these small differences in growth rates represent the difference between poverty and riches, between starvation and plenty.  Economics is nothing if it isn’t concerned with human welfare.  Therefore, we can understand very little if we can’t understand the determinants of economic growth. The purpose of this course is to begin to discover exactly what is known about the determinants of economic growth.  The basic path of the course will be threefold.  First, we will attempt a brief look at the historical record as it applies to economic growth.   Second, we develop the economics of growth.  The basic question will be, how well can economic theory explain the actual growth record of the world’s countries.  Finally, we will address case studies and topics of special interest to you.  The literature on growth is much too large to address the field in one course.  We will pick and choose according to your interests. Possible areas of interest may come from the following (or any other topic): Is AIDS good for growth?, are poor countries destined to remain poor because of their geography?, is a more equal distribution of income bad for growth?, what impact is the computer/information technology (IT) revolution having on economic growth?, is growth bad for the environment or is that even an open question?, does the nature of technological progress hurt poor people and help rich people?, does growth in one country come at the expense growth in another country?, what is the relationship between innovation and market structure?.  There are so many issues.  Think of some more. TEXTS Introduction to Economic Growth, Second edition, by Charles I. Jones, W. W. Norton & Company, 2002. The Economics of Industrial Innovation, 3rd Edition, by Chris Freeman and Luc Soete, MIT Press, 1997. Technology and American Economic Growth, by Nathan Rosenberg, M. E. Sharpe, 1972. A few very cheap copies are available from Amazon.com.  Packet of readings. GRADING This course is designated as writing intensive.  All grading will contain a writing component. 1.    There will be one midterm exam.  This exam will be given in class around October 17, 2002.  This exam will account for 30% of your grade. 2.    There will be a final exam given on Wednesday, December 18 from 8:00-10:00.  This exam will account for 30% of your grade.  The exam will be comprehensive.  The course material will be accumulative.  Thus, an essay final will, by its very nature, be cumulative. 3.    There will be one term paper.  In this paper, the student will be required to pick one country to analyze as a case study.  The paper will outline the country’s growth history and utilize the economic models of growth to write an advisor’s report on what the future growth prospects are and what specific policies will be useful in increasing the country’s growth rate.  Each paper will include growth accounting.  This paper will count 30% of the grade.  The first draft of the paper will be due on November 26, 2002.  The final draft will be due when the paper is presented to the class. 4.    The final 10% of the grade comes from written homework assignments, class participation, and the student’s class presentation of the paper. Resources on Growth As an old-timer, I always prefer going to the library to find information on a topic.  However, as an economist, I recognize that this is not very efficient.  The Internet is full of data and general information on growth rates, as well as papers and reports on economic growth.  Several sites are great starters.   Economic Growth Resources at http://www.nuff.ox.ac.uk/Economics/Growth/ is the first site to explore.  Also see, http://netec.mcc.ac.uk/~adnetec/WebEc/webeco.html.  Next is a very interesting site devoted to the issue of geography and growth at http://www.cid.harvard.edu/cidglobal/economic.htm.   Theses sites will direct you to any topic and any data set you may want. Course Outline I.    The State of the World Jones, Introduction to Economic Growth, (hereafter Jones), Chapter 1. Pritchett, Lant (1997), “Divergence Big Time,” Journal of Economic Perspectives. II.    A Framework for Understanding the State of the World Smith, Adam (1937/1776), An Inquiry into the Nature and Causes of the Wealth of Nations.  Book I, Introduction and chapters 1-3; Book II, Introduction and chapters 1, 3 and 5; Book III, chapter 1. Elmslie, Bruce (1994), “The Endogenous Nature of Technological Progress and Transfer in Adam Smith’s Thought,” History of Political Economy. III.    How We Got Here from There Freeman, Chris and Luc Soete (1997), The Economics of Industrial Innovation (hereafter Freeman), 3rd Edition, MIT Press, chapters 1-7.  This is a quick read. Rosenberg, Nathan (1972), Technology and American Economic Growth, M.E. Sharpe. Mowery, David and Nathan Rosenberg (1998), Paths of Innovation, Cambridge University Press. The relevant chapter is in the packet. IV.    Understanding the Economics of Growth a.    “Old” Growth Theory and the Issue of Convergence Jones, chapters 2 and 3. Abramovitz, Moses (1986), “Catching Up, Forging Ahead, and Falling Behind,” Journal of Economic History. (Packet) Baumol, William (1994), “Multivariate Growth Patterns: Contagion and Common Forces as Possible Sources of Convergence,” in Convergence of Productivity, edited by William Baumol, Richard Nelson, and Edward Wolff, Oxford University Press. (Packet) Mancur Olson (1996), “Big Bill Left on the Sidewalk: Why Some Nations are Rich, and Others Poor,” Journal of Economic Perspectives, Vol. 10, No. 2. b.    “New” Growth Theory – The Economics of Induced Growth Jones, chapters 3-5. Sedgley, Norman and Bruce Elmslie (2001), “Agglomeration and Congestion in the Economics of Ideas and Technological Change,” American Journal of Economics and Sociology. (Packet) Jones, Charles (2002), “Sources of U.S. Economic Growth in a World of Ideas,” American Economic Review, Vol. 92, No. 1. Sedgley, Norman and Bruce Elmslie (2002), “Do We Still Need Cities?: Evidence from Count Data Models of Metropolitan Statistical Area Patents,” mimeo. Freeman, chapter 13. Jones, chapters 6-8, 10. Easterly, William (2002), The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics, MIT Press, chapters 11-13. V.    Public Policy and Growth Freeman, chapter 16. V.    The Rest of the Story The rest of the course is open to student papers and other topics of special interest.