Division of the Humanities
and Social Sciences

Ec 140: Economic Progress

Tuesdays & Thursdays, 2:30–3:55 p.m. // 237 Baxter

Professors: Kim C. Border, Phillip T. Hoffman
Email: kcb@caltech.edu, pth@hss.caltech.edu

Why are some societies rich, while others are mired in poverty?

This course will investigate some of the theoretical, empirical, and historical literature on economic progress.

• Exams
  • First half-term exam with Solutions
  • Second half-term exam
• Links to readings by session:
  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19

• Links to Further Reading:
  • Historical Perspectives on Growth
  • Aggregate Production Function
  • Classic Theoretical Papers
  • Innovation
  • Technology Adoption
  • Convergence
  • Other Empirical Studies
  • Econometric Issues
  • Control Theory
  • Endogenous Growth Theory
  • Sustainability
  • Political Economy of Growth
  • Corruption and Growth
  • Natural Resources
  • Geography
  • Human Capital

Required Course Work

The course will consist of roughly one part lectures to two parts class discussion of readings. On days scheduled for discussion, you are required to show up in class and make reasoned, insightful comments.

You are also required to write a half-page summary of each paper that is listed for discussion, and submit it via e-mail by 9:00 am of the discussion day. Please include the string "Ec 140" in the subject header of your e-mail. Make sure your name is on your summary and that you clearly identify the paper you are summarizing. The preferred formats for submission are ASCII, PDF, or RTF.

The article summaries should be more than a restatement of the abstract. They should be useful to someone contemplating whether to read the paper. You should try to indicate how the paper fits in with the course—is it an extension of a previous paper, an attack on a previous paper, or does it raise new questions? You should mention the paper's key ideas or results, the nature of the data if the paper is empirical, and the structure of the model if the paper is theoretical. You are encouraged to make judgments on the reasonableness of the paper. The fact that a paper has been published does not make it correct or true, but it might be.

You will be required to lead the discussion on one of the topics to be covered. This will entail preparing a handout on the topic and raising questions that will encouage discussion.

There will be two half-term exams, one during midterms week, and the other during finals week.

You will be graded on the basis of your participation in discussions, the two half-term exams, your summaries, and your performance as discussion leader. An equally weighted geometric mean (Cobb–Douglas production technology) of these normalized scores will be used as the basis for the course grade. Note that a zero on any part gives a zero geometric mean.

Schedule

1. Tuesday, September 26

Introduction

Introductory remarks by the professors, an overview of the topic, and a visual presentation of economic growth by Hans Rosling and the BBC's Joy of Stats. (Flash video)

Prof. Hoffman's slides.

2. Thursday, September 28

Measuring growth and some history

Lecture by Prof. Hoffman.

Definition and measurement of economic progress. Growth accounting. Correlates of growth. Some history of growth.

Prof. Hoffman's slides.

• Notes on the growth accounting identity.
• Notes on the Cobb–Douglass production function for GDP.

3. Tuesday, October 3

Discussion

Reading for discussion

• Amartya Sen. 1998. Mortality as an Indicator of Economic Success and Failure. Economic Journal 108: 1–25. On-line at JSTOR.
• Robert C. Allen. 2003. Progress and Poverty in Early Modern Europe. Economic History Review 56: 403–443. On-line at JSTOR.

4. Thursday, October 5

Introduction to the theory of economic progress

Lecture by Prof. Border.

Early theories of economic progress: Marx, von Neumann, Harrod–Domar, Solow. The Cobb–Douglas production function. Technical change and growth. The convergence hypothesis.

Background reading

• Karl Marx and Friedrich Engels. 1847. Manifesto of the Communist Party, Part I. English edition, 1888. On-line at the Yale Law School
• Robert M. Solow. 1956. A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics 70: 65–94. On-line at JSTOR.

Handouts

• Notes on the Solow model with pretty pictures.
• Notes on the overlapping generation Solow model with technological progress.

5. Tuesday, October 10

The role and measurement of technological change

Reading for discussion

• Robert M. Solow. 1957. Technical Change and the Aggregate Production Function. Review of Economics and Statistics 39: 312–320. On-line at JSTOR.
• Jacob Schmookler. 1966. Excerpts from Invention and Economic Growth. Harvard University Press. Chapters 1, 3, 5, 11 (70 pp).

6. Thursday, October 12

More advanced theory of economic growth

Lecture by Prof. Border.

Pontryagin's Maximum Principle. Endogenous saving.

Handouts

• Notes on Weitzman's treatment of the Maximum Principle
• Notes on endogenous savings

Further reading

• Articles on control theory

7. Tuesday, October 17

Empirical tests and challenges to the theory

Reading for discussion

• William Easterly and Ross Levine. 2001. It's Not Factor Accumulation: Stylized Facts and Growth Models. The World Bank Economic Review 15: 177–219. On-line
• Lant Pritchett. 1997. Divergence, Big Time. Journal of Economic Perspectives 11: 3–17. On-line at JSTOR
• Robert E. Lucas, Jr. 1990. Why Doesn't Capital Flow from Rich to Poor Countries? American Economic Review 80: 92–96. On-line at JSTOR

8. Thursday, October 19

The Industrial Revolution

Lecture by Prof. Hoffman. Here are the notes.

9. Tuesday, October 24

Industrial Revolution

Reading for discussion

• Robert C. Allen. 2009. The Industrial Revolution in Miniature: The Spinning Jenny in Britain, France, and India. Journal of Economic History 69: 901-927. DOI: 10.1017/S0022050709001326
• Morgan Kelly, Joel Mokyr, and Cormac Ó Gráda. 2013. Precocious Albion: A New Interpretation of the British Industrial Revolution. On-line at University College Dublin

  Published in

  Annual Review of Economics 6: 363-389.

10. Thursday, October 26

Some difficulties

Reading for discussion

• Gregory Clark. 1987. Why Isn`t the Whole World Developed? Lessons from the Cotton Mills. Journal of Economic History 47: 141–173. On-line at JSTOR
• David S. Landes. 2006. Why Europe and the West? Why Not China? Journal of Economic Perspectives 20: 3–22. On-line at JSTOR

First half-term exam

The first half-term exam is due 2:30 pm, Tuesday October 31.

11. Tuesday, October 31

Growth and demographic change

Lecture by Prof. Hoffman.

12. Thursday, November 2

Endogenous growth theory models

Discussion Leader: Joseph Schneider

Reading for discussion

• Charles I. Jones and Paul M. Romer. 2010. The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital. American Economic Journal: Macroeconomics 2: 224–245. On-line.
• Paul M. Romer. 1996. Why, Indeed, in America? Theory, History, and the Origins of Modern Economic Growth. American Economic Review 86: 202–206. On-line at JSTOR
• Robert E. Lucas, Jr. 1993. Making a Miracle. Econometrica 61: 251–272. On-line at JSTOR

13. Tuesday, November 7

Modeling the demographic transition

Discussion Leader: Katherine Knox

Reading for discussion

• Oded Galor and David N. Weil. 2000. Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond. American Economic Review 90: 806–828. On-line at JSTOR

14. Thursday, November 9

Biology, culture, and growth

Discussion Leader: Timothy Chou

Reading for discussion

• Enrico Spolaore and Romain Wacziarg. 2013. How Deep Are the Roots of Economic Development? Journal of Economic Literature 51: 325–369. DOI: 10.1257/jel.51.2.325
• George J. Stigler and Gary S. Becker. 1977. De Gustibus Non Est Disputandum. American Economic Review 67: 76–90. On-line at JSTOR

15. Tuesday, November 14

Politics, institutions, and growth

Discussion Leader: Alejandro Yankelevich

Reading for discussion

• Daron Acemoğlu, Simon Johnson, and James A. Robinson. 2002. Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution. Quarterly Journal of Economics 117: 1231–1294. On-line at JSTOR
• Edward L. Glaeser, Rafael La Porta, Florencio Lopez-De-Silanes, and Andrei Shleifer. 2004. Do Institutions Cause Growth? Journal of Economic Growth 9: 271–303. On-line at JSTOR

16. Thursday, November 16

History and Growth

Discussion Leader: Spencer Strumwasser

Reading for discussion

• Nathan Nunn. 2008. The Long-Term Effects of Africa's Slave Trades. Quarterly Journal of Economics 123: 139–176. On-line at JSTOR
• Melissa Dell. 2010. The Persistent Effects of Peru's Mining Mita. Econometrica 78: 1863–1903. On-line at JSTOR

17. Tuesday, November 21

More big obstacles to growth

Discussion Leader: Noah Huffman

Reading for discussion

• Andrei Shleifer and Robert W. Vishny. 1993. Corruption. Quarterly Journal of Economics 108: 599–617. On-line at JSTOR
• Abhijit V. Banerjee and Esther Duflo. Growth Theory Through The Lens Of Development Economics. In Philippe Aghion and Steven N Durlauf, ed. 2005. Handbook of Economic Growth. Elsevier, Amsterdam. ISBN: 0444508376. On reserve in Sherman Fairchild Library, November 1–December 8.

Thursday, November 23

Thanksgiving Holiday

18. Tuesday, November 28

Inequality

Lecture by Prof. Hoffman. Slides

19. Thursday, November 30

Is growth slowing?

Reading for discussion

• Nicholas Bloom, Charles I. Jones, John Van Reenen, and Michael Webb. 2017. On-line
• Robert J. Gordon. 2016. The Rise and Fall of American Growth: The U.S. standard of living since the Civil War. Princeton University Press. Chapters 17–18, pages 566–640. On reserve at the Sherman Fairchild Library, November 1–December 8.

Second half-term exam

Further Reading

These may not be assigned, but you may find them relevant.

Historical Perspectives on Growth

• Robert C. Allen. 2003. Progress and Poverty in Early Modern Europe. Economic History Review 56: 403–443. On-line at JSTOR.
• Robert C. Allen. 2001. The Great Divergence in European Wages and Prices from the Middle Ages to the First World War. Explorations in Economic History 38: 411–447. DOI: 10.1006/exeh.2001.0775
• Gregory Clark. 2003. The Great Escape: The Industrial Revolution in Theory and in History. Manuscript, UC Davis. Preprint.
• Walt W. Rostow. 1956. The Take-Off Into Self-Sustained Growth. Economic Journal 66: 25–48. DOI: 10.2307/2227401
• Walt W. Rostow. 1959. The Stages of Economic Growth. Economic History Review 12: 1–16. DOI: 10.2307/2591077

The Aggregate Production Function

• Charles W. Cobb and Paul H. Douglas. 1928. A Theory of Production. American Economic Review 18: 139–165. On-line at JSTOR. Supplement, Papers and Proceedings of the Fortieth Annual Meeting of the American Economic Association.
• Herbert A. Simon and Ferdinand K. Levy. 1963. A Note on the Cobb-Douglas Function. Review of Economic Studies 30: 93–94. On-line at JSTOR.
• Gerald Beer. 1980. The Cobb-Douglas Production Function. Mathematics Magazine 53: 44–48. On-line at JSTOR.
• Hendrik S. Houthakker. 1955–56. The Pareto Distribution and the Cobb–Douglas Production Function in Activity Analysis. Review of Economic Studies 23: 27–31. On-line at JSTOR.
• Paul A. Samuelson. 1962. Parable and Realism in Capital Theory: The Surrogate Production Function. Review of Economic Studies 29: 193–206. On-line at JSTOR.

The Theoretical Classics

• Roy F. Harrod. 1939. An Essay in Dynamic Theory. Economic Journal 49: 14–33. On-line at JSTOR.
• Evsey D. Domar. 1946. Capital Expansion, Rate of Growth, and Employment. Econometrica 14: 137–147. On-line at JSTOR.
• Robert M. Solow. 1956. A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics 70: 65–94. On-line at JSTOR.
• Leif Johansen. 1959. Substitution Versus Fixed Production Coefficients in the Theory of Economic Growth: A Synthesis. Econometrica 27: 157–176. On-line at JSTOR.
• Leif Johansen. 1961. Durability of Capital and Rate of Growth of National Product. International Economic Review 2: 361–370. On-line at JSTOR.
• Kenneth J. Arrow, Hollis B. Chenery, B. S. Minhas, and Robert M. Solow. 1961. Capital-Labor Substitution and Economic Efficiency. Review of Economics and Statistics 43: 225–250. On-line at JSTOR
• Laurits R. Christensen, Dale W. Jorgenson, and Lawrence J. Lau. 1973. Transcendental Logarithmic Production Frontiers. Review of Economics and Statistics 55: 28–45. On-line at JSTOR
• John S. Chipman. 1977. A Renewal Model of Economic Growth: The Continuous Case. Econometrica 45: 295–316. On-line at JSTOR

Innovation

• Robert M. Solow. 1957. Technical Change and the Aggregate Production Function. Review of Economics and Statistics 39: 312–320. On-line at JSTOR
• Kenneth J. Arrow. 1962. The Economic Implications of Learning by Doing. Review of Economic Studies 29: 155–173. On-line at JSTOR
• Nancy L. Stokey. 1995. R&D and Economic Growth. Review of Economic Studies 62: 469–489. On-line at JSTOR
• Dale W. Jorgenson and Kevin J. Stiroh. 1999. Information Technology and Growth. American Economic Review 89: 109–115. On-line at JSTOR

Evidence on convergence

• Robert J. Barro. 1991. Economic Growth in a Cross Section of Countries. Quarterly Journal of Economics 106: 407–443. On-line at JSTOR
• Robert J. Barro, Xavier X. Sala-i-Martin, Olivier J. Blanchard, and Robert E. Hall. 1991. Convergence across States and Regions. Brookings Papers on Economic Activity 1991: 107–182. On-line at JSTOR
• Robert J. Barro and Xavier X. Sala-i-Martin. 1992. Convergence. Journal of Political Economy 100: 223–251. On-line at JSTOR
• Ross Levine and David Renelt. 1992. A Sensitivity Analysis of Cross-Country Growth Regressions. American Economic Review 82: 942–963. On-line at JSTOR
• Xavier X. Sala-i-Martin. 1996. The Classical Approach to Convergence Analysis. Economic Journal 106: 1019–1036. On-line at JSTOR
• Jonathan R. W. Temple. 1998. Robustness Tests of the Augmented Solow Model. Journal of Applied Econometrics 13: 361–375. On-line at JSTOR
• Jonathan Temple. 1999. The New Growth Evidence. Journal of Economic Literature 37: 112–156. On-line at JSTOR

Econometric issues

• Edward E. Leamer. 1985. Sensitivity Analyses Would Help. American Economic Review 75: 308–313. On-line at JSTOR
• Xavier X. Sala-i-Martin. 1997. I Just Ran Two Million Regressions. American Economic Review 87: 178–183. On-line at JSTOR

Politics and development

• Seymour M. Lipset. 1959. Some Social Requisites of Democracy: Economic Development and Political Legitimacy. American Political Science Review 53: 69–105. On-line at JSTOR
• Anne O. Krueger. 1974. The Political Economy of the Rent-Seeking Society. American Economic Review 64: 291–303. On-line at JSTOR
• Daron Acemoglu and James A. Robinson. 2000. Political Losers as a Barrier to Economic Development. American Economic Review 90: 126–130. On-line at JSTOR
• Mancur Olson. 1993. Dictatorship, Democracy, and Development. American Political Science Review 87: 567–576. On-line at JSTOR
• Kevin M. Murphy, Andrei Shleifer, and Robert W. Vishny. 1993. Why is Rent-Seeking so Costly to Growth? American Economic Review 83: 409–414. On-line at JSTOR
• János Kornai, Eric Maskin, and Gérard Roland. 2003. Understanding the Soft Budget Constraint. Journal of Economic Literature 41: 1095–1136. On-line at JSTOR
• Edward L. Glaeser, Hedi D. Kallal, Jose A. Scheinkman, and Andrei Shleifer. 1992. Growth in Cities. Journal of Political Economy 100: 1126–1152. On-line at JSTOR

Corruption and development

• Andrei Shleifer and Robert W. Vishny. 1993. Corruption. Quarterly Journal of Economics 108: 599–617. On-line at JSTOR
• Paolo Mauro. 1995. Corruption and Growth. Quarterly Journal of Economics 110: 681–712. On-line at JSTOR
• Daniel Kaufmann and Aart Kraay. 2002. Growth without Governance. Economia 3. On-line at the World Bank
• Daniel Kaufmann and Aart Kraay. 2003. Governance and Growth: Causality which Way?—Evidence for the World, in Brief. World Bank. On-line at the World Bank
• Daniel Kaufmann and Aart Kraay. 2003. Governance and Growth: Causality which Way?—Evidence for the World, in Brief. World Bank. On-line at the World Bank.

Natural Resources

• W. M. Corden and J. P. Neary. 1982. Booming Sector and De-Industrialisation in a Small Open Economy. Economic Journal 92: 825–848. On-line at JSTOR
• W. M. Corden. 1984. Booming Sector and Dutch Disease Economics: Survey and Consolidation. Oxford Economic Papers 36: 359–380. On-line at JSTOR
• Xavier Sala-i-Martin, Gernot Doppelhofer, and Ronald I. Miller. 2004. Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach. American Economic Review 94: 813–835. On-line at JSTOR

Technology adoption

• Stephen L. Parente and Edward C. Prescott. 1994. Barriers to Technology Adoption and Development. Journal of Political Economy 102: 298–321. On-line at JSTOR
• Stephen L. Parente and Edward C. Prescott. 1999. Monopoly Rights: A Barrier to Riches. American Economic Review 89: 1216–1233. On-line at JSTOR
• Edward C. Prescott. 1998. Lawrence R. Klein Lecture 1997: Needed: A Theory of Total Factor Productivity. International Economic Review 39: 525–551. On-line at JSTOR
• Susan Wolcott. 1994. The Perils of Lifetime Employment Systems: Productivity Advance in the Indian and Japanese Textile Industries, 1920-1938. Journal of Economic History 54: 307–324. On-line at JSTOR

Human capital

• Anne O. Krueger. 1968. Factor Endowments and Per Capita Income Differences among Countries. Economic Journal 78: 641–659. On-line at JSTOR
• Kenneth J. Arrow. 1962. The Economic Implications of Learning by Doing. Review of Economic Studies 29: 155–173. On-line at JSTOR
• Paul M. Romer. 1987. Growth Based on Increasing Returns Due to Specialization. American Economic Review 77: 56–62. On-line at JSTOR

Endogenous growth, increasing, returns

• Paul M. Romer. 1994. The Origins of Endogenous Growth. Journal of Economic Perspectives 8: 3–22. On-line at JSTOR
• Paul M. Romer. 1986. Increasing Returns and Long-Run Growth. Journal of Political Economy 94: 1002–1037. On-line at JSTOR
• Paul M. Romer. 1990. Are Nonconvexities Important for Understanding Growth? American Economic Review 80: 97–103. On-line at JSTOR
• Luis A. Rivera-Batiz and Paul M. Romer. 1991. Economic Integration and Endogenous Growth. Quarterly Journal of Economics 106: 531–555. On-line at JSTOR
• Luis Rivera-Batiz and Paul M. Romer. 1994. Economic Integration and Endogenous Growth: An Addendum. Quarterly Journal of Economics 109: 307–308. On-line at JSTOR

Sustainability

• Nancy L. Stokey. 1998. Are There Limits to Growth? International Economic Review 39: 1–31. On-line at JSTOR

More empirical work

• Chrys Dougherty and Dale W. Jorgenson. 1996. International Comparisons of the Sources of Economic Growth. American Economic Review 86: 25–29. On-line at JSTOR
• Dale W. Jorgenson and Mieko Nishimizu. 1978. U.S. and Japanese Economic Growth, 1952-1974: An International Comparison. Economic Journal 88: 707–726. On-line at JSTOR
• N. G. Mankiw, Edmund S. Phelps, and Paul M. Romer. 1995. The Growth of Nations. Brookings Papers on Economic Activity 1995: 275–326. On-line at JSTOR

Geography and Growth

• David E. Bloom, Jeffrey D. Sachs, Paul Collier, and Christopher Udry. 1998. Geography, Demography, and Economic Growth in Africa. Brookings Papers on Economic Activity 1998: 207–295. On-line at JSTOR

Some control theory

• Martin L. Weitzman. 2003. Income, Wealth, and the Maximum Principle. Harvard University Press, Cambridge, Mass.
• David Cass. 1965. Optimum Growth in an Aggregative Model of Capital Accumulation. Review of Economic Studies 32: 233–240. On-line at JSTOR
• Peter A. Diamond. 1965. National Debt in a Neoclassical Growth Model. American Economic Review 55: 1126–1150. On-line at JSTOR
• Robert Dorfman. 1969. An Economic Interpretation of Optimal Control Theory. American Economic Review 59: 817–831. On-line at JSTOR
• Robert Dorfman. 1970. An Economic Interpretation of Optimal Control Theory: Errata. American Economic Review 60: 524. On-line at JSTOR
• Martin L. Weitzman. 1973. Duality Theory for Infinite Horizon Convex Models. Management Science 19: 783–789. On-line at the Cowles Commission
• Hubert Halkin. 1974. Necessary Conditions for Optimal Control Problems with Infinite Horizons. Econometrica 42: 267–272. On-line at JSTOR