topic 3

ECON621Topic 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.


Drivers of growth


More drivers of growth


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.


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.


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.


topic 3

Technology