Macroeconomics: Institutions and Policy

The principal objective of this course is to equip the student with the tools and ideas necessary to analyse fundamental theories of economic growth. These include the ability to derive and explain the theory of exogenous and endogenous growth models, and to "take the models to the data" to assess how well they can explain observed trends in growth among both developed and developing countries. Particular attention is given to the decline in the labour share of national income observed in developed countries since the 1980's, and whether this trend can be explained by the rise of automation technologies. The role of institutions, such as democracy and the rule of law, in explaining cross-country differences in growth is also covered. To this end, the course will depart from the Solow model and identify its strengths and weaknesses in explaining established macroeconomic facts and recent trends in economic growth. In a second stage, the weaknesses identified will be addressed in different augmentations of the Solow model and in endogenous growth models. The student will learn to solve these models algebraically, program it, and simulate it. Finally, the course will explore the role of technology and market power in explaining how the material welfare of economic growth is distributed among workers of different occupations, and across workers and capital owners.