ECO 2117 Lecture Notes - Lecture 5: Diminishing Returns, Development Geography, Productive Forces
20 Aug 2016
School
Department
Course
Professor
ECO2117
January 28th 2016
*continued from last class
-are living standards converging? why is this expected?
-technology transfer (no need to reinvent the wheel)
-factor accumulation (law of diminishing marginal returns — higher investment in developing
countries)
-convergence happens when poorer countries grow faster than richer countries
-evidence of unconditional conference is hard to find
-increasing evidence of “per capita income convergence” (weighting changes in per capita
income by population size)
-problem with selection bias:
-if you cherry pick from the whole population a group of countries according to a certain
criteria your result is going to be biased
-by only looking at countries where the economy grew, you will only see the success stories
-to understand the long running causes of comparative development, we must understand
colonization
-a schematic framework summarizes recent research on these causes and explains
variations in development
-direct impact of physical geography (1)
-factors such as malaria prevalence or landlocked status may play a direct role in
development
-have to go further than just geography because French colonizers were very badly
explaining development
-geography determined potential settlers’ morality (Acemoglu, Johnson, & Robinson (2001))
•when mortality rates were high, settlers avoided long term settlements and established
institutions favouring extraction (over production incentives)
•because mortality was high, settlers did not stay in the area to improve it
•took a “steal fast and get out” approach
•these low quality institutions persist and influence economic activity and cicil society
mobilization
-when climate change was suitable for plantation agriculture, slavery and mass exploitation
of indigenous labour were introduced (Engerman and Sokoloff (2005))
! of !1 3
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Document Summary
Technology transfer (no need to reinvent the wheel) Factor accumulation (law of diminishing marginal returns higher investment in developing countries) Convergence happens when poorer countries grow faster than richer countries. Evidence of unconditional conference is hard to nd. Increasing evidence of per capita income convergence (weighting changes in per capita income by population size) If you cherry pick from the whole population a group of countries according to a certain criteria your result is going to be biased. By only looking at countries where the economy grew, you will only see the success stories. To understand the long running causes of comparative development, we must understand colonization. A schematic framework summarizes recent research on these causes and explains variations in development. Factors such as malaria prevalence or landlocked status may play a direct role in development. Have to go further than just geography because french colonizers were very badly explaining development.
