This document discusses drivers of economic growth. It summarizes views that institutions, openness, infrastructure, and human capital are important drivers. It also discusses a paper finding that the proportion of European settlers during colonization is positively associated with current development levels in those countries, indicating Europeans brought growth-promoting characteristics like institutions and human capital. The document concludes that debate over growth drivers will continue but getting many policies right is important for growth.

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ECON621
Topic 3
Drivers of growth

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Introduction
• 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.

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Drivers of growth

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More drivers of growth

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Deep 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.

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Deep 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.

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Conclusions
• 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 week's reaction to the DA's
economic growth plan.
• We will be having a closer look at some of the policy
options throughout this course.