Content:

The main goal of the course is to introduce the basic tools and fundamental ideas in growth theory. First, we present in some detail two basic approaches to the solution of dynamic problems in economics: optimal control and dynamic programming. We then move to the neoclassical model of growth: the Ramsey Cass Koopmans model. This is one of the two currently dominating frameworks of analysis in the study of macroeconomic dynamics and economic growth. We consider in detail the assumptions needed for the results of existence, uniqueness and stability of general market equilibrium to obtain and for the validity of the two welfare theorems in this model. We then present two basic extensions of the Ramsey model in which technological progress is due to R&D leading  to an expansion in the number of different goods produced or to an improvement in their quality and show how endogenizing technical progress requires giving up the assumption of convexity of the aggregate production set so that the market equilibrium cannot be efficient. We then move to study skill-biased technical change and present a model where the path of technical progress takes is affected by the relative supply of factors of production. We then apply the model to explain the increase in inequality experienced by advanced economies in the last decades. Finally we introduce the basic overlapping generations model, the second core model in macroeconomic dynamics, in which agents have a finite horizon in making choices and show that the market equilibrium in this model may again be inefficient.

Syllabus

1. Optimal Control
2. Dynamic Programming
3. The Neoclassical Growth Model.( Ramsey-Kass_Koopmans)
4. A Horizontal Innovation Model (Romer 1990 ).
5. A Vertical Innovation Model ( Grossman-Helpman 1991 ).
6. Skill-Biased Technological Change ( Acemoglu 2002).
7. The Basic OLG Model ( Diamond 1965)