Compulsory Course - 1st Semester (Autumn 1st year) | Course ID: 0002 | E-Class

Lecturer

Chara Vavoura

Language of instruction

Greek and English

Description of the course

The aim of the course is to familiarize students with advanced models of economic growth and their empirical applications. The course starts with the neoclassical models of exogenous growth (Solow, 1956; Ramsey, 1928; Diamond, 1965) which rank among the first attempts at a systematic theoretical investigation of economic growth. In the following, the weaknesses of these models and their performance as quantitative research tools are analysed. The second part of the course covers models of endogenous growth and in particular models where economic growth is driven by investment in Research and Development. The Rebelo (1991), Rivera-Batiz & Romer (1991), Romer (1990), Aghion & Howitt (1992) and Grossman & Helpman (1991) models are analysed, after a prior presentation of the mathematical tools of dynamic programming needed to solve the endogenous growth models. The last part of the course presents the latest developments in research related to economic growth and becomes, firstly, an occasion for reflection on the future of the subject and, secondly, a source of inspiration for the students' future career as independent researchers.

How the aim of the course is achieved: Students are trained by solving examples in class and presenting their results in detail. The deepening of theoretical concepts and mathematical methods is achieved by solving exercises in class and in the form of assignments and homework on a weekly basis.

Course Outline

1. The Research Questions of Economic Growth.
2. The Solow Growth Model.
3. The Neoclassical Growth Model.
4. Diamond's Overlapping Generations Model.
5. Dynamic Programming.
6. Endogenous Growth Models - Part 1 (Rebelo, 1991; Rivera-Batiz & Romer, 1991; Romer, 1990).
7. Models of Endogenous Growth - Part 2 (Aghion & Howitt, 1992; Grossman & Helpman, 1991)
8. The Future of Economic Growth

Bibliography

Suggested Textbooks

• Romer, D. Advanced Macroeconomics. McGraw Hill, 2011.
• Acemoglu, D. Introduction to Modern Economic Growth. Princeton University Press, 2009.

Additional Textbooks

• Aghion, P. and P. Howitt, “A Model of Growth Through Creative Destruction”, Econometrica 60.2 (1992), pp. 323–351.
• Akcigit, Ufuk, “Economic Growth: The Past, the Present, and the Future”, Journal of Political Economy, 125.6 (2017), pp.1736–1747.
• Cass, David, “Optimum Growth in an Aggregative Model of Capital Accumulation”, Review of Economic Studies, 32.3 (1965), pp. 233-240.
• Diamond, P. A., “National Debt in a Neoclassical Growth Model”, American Economic Review, 55.5 (1965), pp. 1126-1150.
• Grossman, G. M., and E. Helpman, “Quality Ladders in the Theory of Growth”, Review of Economic Studies, 58.1 (1991), pp. 43–61.
• Jones, C. I., “R&D-based Models of Economic Growth”, Journal of Political Economy, 103.4 (1995), pp. 759–784.
• Kaldor, N., “Capital Accumulation and Economic Growth”, In F.A. Lutz and D.C. Hague (eds). The Theory of Capital, International Economic Association Series, Palgrave Macmillan, London, 1961, pp. 177-222.
• Lucas, R. E., “On the Mechanics of Economic Development”, Journal of Monetary Economics, 22.1 (1988), pp. 3–42.
• Ramsey, F. P., “A Mathematical Theory of Saving”, The Economic Journal, 38.152 (1928), pp. 543–559.
• Rebelo, S., “Long-run Policy Analysis and Long-Run Growth”, Journal of Political Economy, 99.3 (1991), pp. 500-521.
• Rivera-Batiz, Luis A., and Paul M. Romer, “Economic Integration and Endogenous Growth”, Quarterly Journal of Economics, 106.2 (1991), pp. 531-555.
• Romer, P. M., “Increasing Returns and Long-run Growth”, Journal of Political Economy, 94.5 (1986), pp. 1002–1037.
• Romer, P. M., “Endogenous Technological Change”, Journal of Political Economy, 98.5 (1990), pp. 71–102.
• Smulders, S., and T. van de Klundert, “Imperfect Competition, Concentration and Growth with Firm-specific R&D”, European Economic Review, 39.1 (1995), pp. 139–160.
• Solow, R. M., “A Contribution to the Theory of Economic Growth”, Quarterly Journal of Economics, 70.1 (1956), pp. 65-94.

References

• Aghion, Ph. and P. Howitt, “A Model of Growth Through Creative Destruction”, Econometrica 60.2 (1992), pp. 323–351.
• Akcigit, U., “Economic Growth: The Past, the Present, and the Future”, Journal of Political Economy, 125.6 (2017), pp. 1736–1747.
• Cass, D., “Optimum Growth in an Aggregative Model of Capital Accumulation”, Review of Economic Studies, 32.3 (1965), pp. 233-240.
• Diamond, P. A., “National Debt in a Neoclassical Growth Model”, American Economic Review, 55.5 (1965), pp. 1126-1150.
• Grossman, G. M., and E. Helpman, “Quality Ladders in the Theory of Growth”, Review of Economic Studies, 58.1 (1991), pp. 43–61.
• Jones, C. I., “R&D-based Models of Economic Growth”, Journal of Political Economy, 103.4 (1995), pp. 759–784.
• Kaldor, N., “Capital Accumulation and Economic Growth”, In F.A. Lutz and D.C. Hague (eds). The Theory of Capital, International Economic Association Series, Palgrave Macmillan, London, 1961, pp. 177-222.
• Lucas, R. E., “On the Mechanics of Economic Development”, Journal of Monetary Economics, 22.1 (1988), pp. 3–42.
• Ramsey, F. P., “A Mathematical Theory of Saving”, The Economic Journal, 38.152 (1928), pp. 543–559.
• Rebelo, S., “Long-run Policy Analysis and Long-Run Growth”, Journal of Political Economy, 99.3 (1991), pp. 500-521.
• Rivera-Batiz, Luis A., and Paul M. Romer, “Economic Integration and Endogenous Growth”, TheQuarterly Journal of Economics, 106.2 (1991), pp. 531-555.
• Romer, P. M., “Increasing Returns and Long-run Growth”, Journal of Political Economy, 94.5 (1986), pp. 1002–1037.
• Romer, P. M., “Endogenous Technological Change”, Journal of Political Economy, 98.5 (1990), pp. 71–102.
• Smulders, S., and T. van de Klundert, “Imperfect Competition, Concentration and Growth with Firm-specific R&D”, European Economic Review, 39.1 (1995), pp. 139–160.
• Solow, R. M., “A Contribution to the Theory of Economic Growth”, Quarterly Journal of Economics, 70.1 (1956), pp. 65-94.

Assessment

The course is assessed by the grade of the final examination. For participation in the final examination, it is considered necessary to solve the weekly exercises, which are also solved in class, with the participation of the students. The final written examination includes mathematical problems similar to the examples presented in class during the course. Students are assessed on their understanding of key concepts, critical thinking, and completeness in analysis on the material taught. The assessment criteria, the format of the topics and the structure of their grading are communicated to the students from the beginning of the course (class and e-class), and review sessions are held where students' questions, weekly exercises and topics from previous years are solved.