AGEC 340: International Economic Development

Course slides for week 1 (Jan. 12-15)

Introduction to AGEC 340

• Review syllabus and handouts from the class website • Fill out background questionnaire • Use quick-feedback forms as needed

• What is “International Economic Development”?

• Why aren’t all countries equally developed?

Why AGEC 340?What is International Economic Development?

– International: across or between countries

– Economic: what happens that is measurable “the economy” is production, consumption, trade

“economics” is our analysis of it

– Development: what happens over time

• In economics, we try to…

• To forecast or recommend, we need theories…– like any way of thinking, but more explicit

How is economics different?

• A key change over time is that people get richer

• In AGEC 340, we explain development using economics– observed facts result from “equilibrium” among “optimizers”

What about economics of development?

Development involves accumulation of stuff, that economists call “capital”.

The accumulation of capital makes it more abundant and cheaper.

What happens during development?

Development also involves innovation, which economists call “technical change”

Innovation makes it possible to produce more of what people want, from the resources they have.

What else happens during development?

During development, we get richer… but do we get happier?

Maybe not…

Why aren’t all countries equally developed?

First, let’s look at the data:

http://graphs.gapminder.org/world

Then, looking across countries, we can ask:

Where are the rich countries?

Where are the poor?

Our textbook map of the world:Where are the rich? Where are the poor?

GDP per capita by latitude, 1995

Source: Sachs, JD, “Tropical Underdevelopment.” NBER Working Paper 8119. Cambridge, MA: NBER.

The temperate regions are much richer than tropical areas

Another view of the world…

Country sizes proportional to area

Source: www.worldmapper.org/display.php?selected=1

Temperate regions produce much more income than the tropics

Country sizes proportional to total income

Source: www.worldmapper.org/display.php?selected=170Note: Areas weighted by 2002 total GDP in PPP US dollars.

What about the tropics might slow growth? • Lack of natural resources?

• Culture or religion?

• History? (“The rich get richer & the poor get poorer”?)

• Local institutions and government policy?

• Technology, especially for health and agriculture?

For next week…

Ethiopia (Ch. 2, p. 30)Colombia (Ch. 1, p. 1)

What is “poverty”? How can we measure and compare its severity, over time or across countries?