Macroeconomics: Institutions and Policy, 5 credits

Contents

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.

Expected learning outcomes

Having completed the course, the student is expected to be able to:

Knowledge and understanding

• Describe Kaldor's empirical claims about growth.
• Describe empirical relationships between institutions and growth.
• Interpret growth data, and explain why growth rates differ between countries and over time.
• Explain how traditional capital formation, human capital formation, and investments in research and development can affect economic growth.
• Explain how so-called skill-biased technological development can lead to increased economic inequality between different occupational groups, as well as between workers and capital owners.

Competence and skills

• Mathematically specify and solve the Solow model, and interpret its economic intuition.
• Mathematically specify and solve endogenous growth models, and interpret their economic intuition.
• Graphically illustrate the dynamic properties of the Solow model and endogenous growth models.
• Program and simulate the Solow model and endogenous growth models.

Judgement and approach

• Critically evaluate how different growth models compare to data.
• Discuss and conclude how economic policies affect growth, and how economic policies and welfare institutions can be designed to reduce an uneven distribution of the increased material welfare that follows from growth.

Required Knowledge

60 credits completed courses whereof 45 credits in Economics. Proficiency in English equivalent to the Swedish upper secondary course English 6/level 2.

Form of instruction

Learning is supported by lectures and teacher-led practice sessions.

Examination modes

The following grading scale will be used for the course: Pass with Distinction (Väl Godkänd, VG), Pass (Godkänd, G) and Fail (Underkänd, U).

The examination consists of a written group assignment, as well as an individual written exam. To pass the course, the student must pass both modules and to get the grade Pass with Distinction (VG), the exam additionally needs the assessment Pass with distinction (VG).

A student who does not pass the first examination will be offered an opportunity to sit a re-examination within two months. An additional examination opportunity is normally offered every academic year, one week prior to the start of the autumn term. If required by specific circumstances, other forms of examination may be used.

A student that has failed an examination on two occasions has a right to have another examiner or grading teacher appointed, unless there are special reasons against it. A written request addressed to the Director of Studies should be made no later than two weeks before the next examination opportunity. A written request should be submitted to the Director of Studies no later than two weeks before the next examination opportunity.

Exceptions from examination form as stated in the syllabus can be made for a student who has a decision on pedagogical support for disabilities. Individual adaptations of the examination form should be considered based on the student's needs. The examination form shall be adapted within the framework of the expected learning outcomes stated in the course syllabus. At the request of the student, the course responsible teacher, in consultation with the examiner, must promptly decide on the adapted examination form. The decision must then be notified to the student.

Academic integrity and cheating

As a student, you are expected to act with academic integrity. This means writing and presenting within the limits of the academic rules and expectations communicated in the university's regulations and what is otherwise specified by the responsible department. Disciplinary action may be taken against students who use unauthorized help aids or in some other way tries to mislead on a test or when another type of task is being evaluated. Rules and regulations concerning the production of academic texts and correct referencing will be applicable to written assignments. Submitted material may be subject to plagiarism control. In addition, Umeå University rules and regulations for education and research apply.