economic essay

INTRODUCTION TO

ECONOMIC GROWTH

Somasri Mukhopadhyay

ECON 333 Spring 2017

4th January 2017Session 1

The Course Theme

The Course, “Introduction to Economic Growth”, as the name implies, introduces addressing the issue of Economic Growth experienced and the factors determining and affecting it. Starting from Adam Smith’s “An Enquiry into the Nature and Causes of the Wealth of Nations” (1776), economist over the centuries have dealt with the question of “why are some countries rich and others so poor?” Accordingly, we have Growth Models identifying and modelling the factors affecting growth of economies. In the Neoclassical Tradition, Economic Growth is a branch of Macroeconomics, focussing more on the growth experiences and aspects of the developed countries. That of the relatively poorer economies is more of a subject matter of Economic Development and Economic History. However, the pressing issue of the economic gap among countries and attempting to identify the factors responsible has resulted in Economic Growth emerging as a separate branch of economics. Thus, the later growth models discusses the issues of economic growth across countries, falling more in line with the Classical Approach. Based on the Foundation of a basic understanding of Macroeconomics covered in ECON 204, this course introduces the issues of growth. It will discuss the growth models developed over the decades. Along with that, it will also emphasise on some empirical observations of growth experienced by countries at different stages of their growth.

The Course Design

Topics Chapters in Text Book (Jones/Vollrath)

Introduction: The Facts of Economic Growth

Chapter 1

The Solow Model – Basic Model, Human Capital and Technology

Chapter 2, Chapter 3

Natural Resources and Economic Growth Chapter 10

Endogenous Technological Progress and Economic Growth

Chapters 4 and 5

Population and the Origin of Sustained Economic Growth

Chapter 8

Summing up the Course: Understanding Economic Growth

Chapter 11

Evaluation Criteria Total Marks Time Date – Submission and Exam

Assignment 1 10

Pre Mid-Term

23rd January

Assignment 2 10 20th February

Mid-Term 20 22nd February, 2016, Wednesday. In Class

Assignment 3 10

Post Mid-Term To Be Announced

Assignment 4 10

Final Exam 40 As per the Department / UVIC Exam Schedule

The Evaluation

Introduction to

Economic Growth

Session 1

Note: Data Used are of 2015 Data Presented are based on Data from World Bank

Some Thoughts …. Early 21st Century

Hunger, Disease, the Waste of Human Lives that is Extreme Poverty are an affront to all of

us……….An Equation that crosses Human with Financial Capital, the Strategic Goals of the Rich world with a new kind of Planning in the Poor world.

Bono 2004 The End of Poverty By J.D.Sachs

The Inequality

The Global Scenario – A Snap Shot

Top Ten Economies, 48776475

Bottom 10 Economies,

3660

Middle 10 Economies,

358836

Gross Domestic Product (Mln USD)

Top Ten Economies Bottom 10 Economies Middle 10 Economies

Economic Disparity– Rich Vs Poor

Low income, 392,904, 0%

Lower middle income,

5,820,363, 8%

Upper middle income,

20,319,219, 28%

High income, 46,985,247,

64%

GDP (Mln USD)

Low income

Lower middle income

Upper middle income

High income

Category GDP (MlnUSD) Percentage of

Word GDP Low income 392,904 0.53 Lower middle income 5,820,363 7.92

Upper middle income 20,319,219 27.64

High income 46,985,247 63.92

Economic Disparity – Regional Wise

Europe & Central Asia, 19,985,557,

38%

Latin America & Caribbean,

5,298,318, 10%

Middle East & North Africa,

3,113,598, 6%

North America,

19,503,407, 38%

South Asia, 2,666,094, 5%

Sub-Saharan Africa,

1,572,873, 3%

GDP (Mln USD)

Europe & Central Asia

Latin America & Caribbean Middle East & North Africa

North America

South Asia

Sub-Saharan Africa

Region GDP (Mln USD)

Percentage of Global

GDP

Europe and Central Asia

19985557 38

North America 19503407 38

Latin America and Caribbean

5298318 10

Middle East and North Africa

3113598 6

South Asia 2666094 5

Sub Saharan Africa

1572873 3

Economic Disparity– Income Levels

Top 10 Economies Middle 10 Economies Bottom 10 Economies Ranking Economy GDP Ranking Economy GDP Ranking Economy GDP

1 United States 17,946,996 87 Lithuania 41,244 185 St. Vincent and the Grenadines 751

2 China 10,866,444 88 Ghana 37,864 186 Comoros 624

3 Japan 4,123,258 89 Jordan 37,517 187 Dominica 538

4 Germany 3,355,772 90 Turkmenistan 37,334 188 Tonga 434

5 United Kingdom 2,848,755 91 Serbia 36,513 189 São Tomé and Principe 337

6 France 2,421,682 92 Yemen, Rep. 35,955 190 Micronesia, Fed. Sts. 318

7 India 2,073,543 93 Congo, Dem. Rep. 35,238 191 Palau 287

8 Italy 1,814,763 94 Bolivia 33,197 192 Marshall Islands

187

9 Brazil 1,774,725 95 Bahrain 32,221 193 Kiribati 145

10 Canada 1,550,537 96 Côte d'Ivoire 31,753 194 Tuvalu 38

• Points to be Remembered – Will come back to the Discussions later – Attempt to Draw some inferences which

shall be discussed and applied later – Will Form the basis of Assignment 2

Let Us Initiate Some Case Study Discussion and Elaborate*

*Reference Material “The End of Poverty – Economic Possibilities of our time” by Jeffrey Sachs.

Case 1…………..

• Malawi – Landlocked Country of South Africa – Subsistence Maize Growing Region – Small Plots of land – Year in Consideration – Rains have failed – Devastated by aids.

Points to be Considered • The Region

• The Economy • The Infrastructure

• The Sectors Present • The Basic Amenities

• http://www.worldbank.org/en/country/malawi/overview • http://data.worldbank.org/

Malawi ….. Facts to Consider The economy of Malawi is predominantly agricultural, with about 90% of the population living in rural areas. The landlocked country in south central Africa ranks among the world's least developed countries. • Currency: Malawian kwacha • GDP Per Capita: 226.46 USD • Gross Domestic Product: 3.705 billion USD • Gross National Income: 12.31 billion PPP dollars • GNI Per Capita: 750 PPP dollars GDP Growth Rate: 5.0%

annual change • Internet Users: 5.4% of the population Source: World Bank Year of Data: 2013

• Bangladesh – A country in South Asia – One of the most populous country – A “International Basket Case” in 1971…the

year of Birth of the Country – Per-Capita Income doubled – Life Expectancy Increased – Infant Mortality rate Decreased

Case 2………. Points to be Considered • The Region

• The Economy • The Infrastructure

• The Sectors Present and their Performance

• The Basic Amenities

• http://www.worldbank.org/en/country/bangladesh/overview • http://data.worldbank.org/

Bangladesh…..Facts to Consider The market-based economy of Bangladesh is the 44th largest in the world in nominal terms, and 32nd largest by purchasing power parity; it is classified among the next eleven emerging market economies. • Currency: Bangladeshi taka • GDP Per Capita: 957.82 USD • Gross domestic Product: 150 billion USD • GDP Growth Rate: 6.0% annual change • Gross National Income: 498.8 billion PPP dollars • GNI Per Capita: 3,190 PPP dollars • Internet Users: 6.5% of the population Source: World Bank Year of Data: 2013

• India – A country in South Asia – One of the most Populated Country – Intra-Country Disparity

Case 3…….. Points to be Considered

• The Region • The Economy

• The Infrastructure • The Sectors and their

Performance • The Basic Amenities

• http://www.worldbank.org/en/country/india/overview • http://data.worldbank.org/

India …….. Facts to Consider

The economy of India is the sixth-largest economy in the world measured by nominal GDP and the third-largest by purchasing power parity. • Currency: Indian rupee • GDP Per Capita: 1,498.87 USD • Gross domestic Product: 1.877 trillion USD • GDP Per Capita: 5.0% annual change • Gross National Income: 6.7 trillion PPP dollars • GNI Per Capita: 5,350 PPP dollars • Internet Users: 15.1% of the population Source: World Bank Year of Data: 2013

• China – A Country in East Asia – Underwent a Cultural Revolution – Emerging as one of the most important

economies and trading powers in the world

Case 4………. Points to be Considered

• The Region • The Economy

• The Infrastructure • The Sectors and their

Performance • The Basic Amenities

• http://www.worldbank.org/en/country/china/overview • http://data.worldbank.org/

China….Facts to Consider China is a populous nation in East Asia whose vast landscape encompasses grassland, desert, mountains, lakes, rivers and more than 14,000km of coastline. Capital Beijing mixes modern architecture with historic sites such as the Forbidden City palace complex and Tiananmen Square. Shanghai is a skyscraper-studded global financial center. The iconic Great Wall of China runs east-west across the country's north. • GDP Per Capita: 6,807.43 USD • Currency: Renminbi • Gross Domestic Product: 9.24 trillion USD • GDP Per Capita: 7.7% annual change • Gross National Income: 16.08 trillion PPP dollars • Internet Users: 45.8% of the population • GNI Per Capita: 11,850 PPP dollars Source: World Bank Year of Data: 2013

“ One of the Irony of the success of India and china – the Developing world is the fear that has engulfed the United states – the Developed World that the success in these two countries comes at the expense of the United States”

(The Question – taken from “The End of Poverty – Economic Possibilities of our Time” by J. Sachs)

A Pertinent Question…..A Debate

• The Disparity we Saw • The Economies we considered • The Growth Factors/Issues those came

up • To be continued…..Session 2

Summing Up