htpp://econ621.wordpress.comECON621Topic 3Drivers of growth
htpp://econ621.wordpress.comIntroduction• Now that we have covered what the trends in the world economy are (global slowdown!) the question becomes, what will drive growth?• The views from macroeconomics…• Acemoglu & Robinson (WNF) looks at the reasons for inequality of incomes and growth rates: • They say it is not due to adverse geography, differences in culture or ignorant policymakers. • It can be explained by institutions• In this lecture we examine different views of the drivers of growth.• And have presentations on the importance of openness, infrastructure and human capital.
htpp://econ621.wordpress.comMore drivers of growth
htpp://econ621.wordpress.comDeep determinants• A recent paper by Easterly & Levine looks at the impact of European settlement during the colonial period on economic development today.• There is an interesting literature on how European colonization shaped economic growth in the new world. • Through political institutions: settler vs. extractive colonies. • Influenced the rate of human capital accumulation. • British vs. other European political and legal systems. • Through technological diffusion.• E&L compile data on the historical determinants of European settlement.
htpp://econ621.wordpress.comDeep determinants• They find that the proportion of colonial Europeans of the population is positively and strongly associated with current levels of economic development. • 47% of development outside Europe us attributed to the share of European settlers.• Particularly true for the early stages of colonization.• It matters more than the proportion of Europeans today.• Seems to support the idea that Europeans brought growth-promoting characteristics: • Institutions, • Human capital, • Connections with international markets.
htpp://econ621.wordpress.comConclusions• The debate over the drivers of economic growth is unlikely to be settled anytime soon.• There is no silver bullet – growth is the result of getting many big and small things right.• The relevance is clear in this weeks reaction to the DAs economic growth plan.• We will be having a closer look at some of the policy options throughout this course.