Learning outcomes

In this course, students learn how basic macroeconomic models can be used to answer questions like the following:

  • How can technology diffusion be encouraged and how does it affect the evolution of income differences across countries?
  • What is the effect of an increase in agricultural productivity on economic growth?
  • Are well-functioning informal institutions beneficial or harmful for economic development?
  • How can failures in one sector affect the whole economy?
  • Under which circumstances is coordination among individuals important for economic development?
  • How does robotisation affect the labor income share?
  • How is the evolution of income and wealth inequality affected by financial market imperfections?
  • How does redistributing income from rich to poor households or taxing capital income affect capital accumulation, innovation, and economic growth?

 

Goals

The goal of this course is to improve student’s understanding of the studied topics (see "Content") and to enable them to rigorously address various related issues.

Content

This course studies macroeconomic aspects of economic development, growth, and inequality. The first part analyzes technology diffusion towards developing countries, coordination failures, and the driving forces behind structural change. In the second part, interlinkages between inequality and economic growth are studied.

Detailed content:

Part 1: Economic development and structural change

  • The evolution of income differences across and within countries (empirical)
  • The diffusion of technologies towards developing countries
    • A model of technology diffusion
      • Endogenous distance to the technological frontier
      • Appropriateness of technologies
  • Consumer demand and structural change
    • Stone-Geary preferences and Engel curves
    • Structural change and endogenous growth in a two-sector model
  • Dual economy models
    • Urbanization
    • Formal and informal activities
  • The O-ring theory of economic development
  • Coordination failures
    • Rent-seeking and endogenous career choices
    • Aggregate demand externalities

Part 2: Inequality and growth

  • The neoclassical theory of distribution
    • Robotization and the labor income share
  • Capital market imperfections, inequality, and growth
    • One-period lifetime with bequest model
      • Decreasing returns to individual investment
      • Increasing returns and investment indivisibilities
  • Factor income distribution and growth
    • Infinite horizon (Ramsey)
    • Overlapping generations
    • Growth, distribution, and political economy
  • Personal income distribution and growth
    • Homothetic preferences
    • Consumption indivisibilities and demand-driven innovation

Exercices

Exercises have to be prepared at home and are discussed in class.

Assessment method

Final written exam (2h, closed book).

Sources, references and any support material

  • Several chapters from the following books:
    1. “Introduction to Modern Economic Growth”; Daron Acemoglu; Princeton University Press; 2009
    2. “Income Distribution in Macroeconomic Models”; Gioseppe Bertola, Reto Föllmi, Josef Zweimüller; Princeton University Press; 2006
  • Various papers indicated during the course
  • Old exam questions with solutions

Language of instruction

Français