🗓️ Session 4: Classical and Neoclassical growth models
Abstract
This session examines how economists theorize the drivers of economic growth and their implications for development. We begin with classical perspectives from Smith, Ricardo, and Marx, who focused on systemic dynamics and the limits or contradictions of capitalist growth. We then explore the foundational Solow-Swan model, which introduced factor substitution and diminishing returns to explain stable growth and predict convergence between rich and poor countries.
Through growth accounting, we will see how technological change emerges as the primary driver of long-term growth, leading to endogenous growth theories that attempt to explain innovation and human capital accumulation. You will engage with empirical evidence on convergence and learn to critically evaluate what growth models reveal about development processes - and what important aspects they obscure, including distributional conflicts, institutional factors, and environmental constraints.
🎥 Lecture videos
The four videos are shown below. Alternatively, you can access them via this playlist on Youtube.
🖥️ Lecture Slides
Either click on the slide area below or click here to download the slides.
🎯 Exercise
- More information on the convergence exercise provided here
- The Penn World Tables
- Possible solution
📚 Mandatory Reading
- World Bank (2024) (Download PDF)
🏆 Further Readings
- Solow (1956) and Swan (1956)
- The original papers introducing the fundamental growth model
- Solow (1957)
- The original article on Solow’s empirical growth accounting
- Acemoglu (2017)
- While many expositios are technically very advanced, they give a good overview about the current state of the art of the mainstream approach; chapters 2 and 3 cover the Solow-Swan model in a lot of detail
If you have questions or problems, please post them in the Moodle forum.