This comprehensive introduction to economic growth presents the main facts and puzzles about growth, proposes simple methods and models needed to explain these facts, acquaints the reader with the most recent theoretical and empirical developments, and provides tools with which to analyze policy design. The treatment of growth theory is fully accessible to students with a background no more advanced than elementary calculus and probability theory; the reader need not master all the subtleties of dynamic programming and stochastic processes to learn what is essential about such issues as cross-country convergence, the effects of financial development on growth, and the consequences of globalization. The book, which grew out of courses taught by the authors at Harvard and Brown universities, can be used both by advanced undergraduate and graduate students, and as a reference for professional economists in government or international financial organizations. The Economics of Growth first presents the main growth paradigms: the neoclassical model, the AK model, Romer’s product variety model, and the Schumpeterian model. The text then builds on the main paradigms to shed light on the dynamic process of growth and development, discussing such topics as club convergence, directed technical change, the transition from Malthusian stagnation to sustained growth, general purpose technologies, and the recent debate over institutions versus human capital as the primary factor in cross-country income differences. Finally, the book focuses on growth policies--analyzing the effects of liberalizing market competition and entry, education policy, trade liberalization, environmental and resource constraints, and stabilization policy--and the methodology of growth policy design. All chapters include literature reviews and problem sets. An appendix covers basic concepts of econometrics.
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About the Authors
Philippe Aghion is Robert C. Waggoner Professor of Economics at Harvard University. Aghion is coauthor (with Peter Howitt) of Endogenous Growth Theory (MIT Press, 1997).
Peter Howitt is Lyn Crost Professor of Social Sciences at Brown University. Howitt is coauthor (with Philippe Aghion) of Endogenous Growth Theory (MIT Press, 1997).
“A central puzzle of growth theory is to account for sustained productivity increase in the face of diminishing returns. Aghion and Howitt describe, with great clarity and verve, the main explanations that growth theory has proposed: from denial of the reality of diminishing returns to capital to Schumpeterian creative destruction, with intervening stops for exogenous and endogenous technological progress. An industrious reader can end up poised at the current analytical frontier, prepared to think about open questions and new issues.”--Robert Solow, Department of Economics, MIT"—
"This text is both a clear and a concise survey of several approaches in the study of economic growth and an excellent introduction to the authors' impressive extensions of the Schumpeterian approach to market innovation and innovation policy." Edmund S. Phelps , Director, Center on Capitalism and Society, Columbia University, and Winner of the 2006 Nobel Prize in Economics"—
"Aghion and Howitt have produced a very important and thoughtful book which presents questions, models and answers in a clear and constructive manner. They show how good theory can and should influence both understanding and policy. It will shape the way in which economists think about growth for years ahead."
Nicholas Stern, Lord Stern of Brentford, and IG Patel Professor of Economics and Government, London School of Economics
"Aghion and Howitt's work on growth and policy has vastly increased our understanding of endogenous incentives and supportive policies that drive growth in advanced and developing countries. In this important book, they bring their own insights and the insights of other pioneers to bear on the broader context of growth. This book is accessible, fascinating and extremely useful."
--Michael Spence, Professor Emeritus, Stanford University, and winner of the 2001 Nobel Prize in Economics
"This text is both a clear and a concise survey of several approaches in the study of economic growth and an excellent introduction to the authors' impressive extensions of the Schumpeterian approach to market innovation and innovation policy."
Edmund S. Phelps, Director, Center on Capitalism and Society, Columbia University, and Winner of the 2006 Nobel Prize in Economics
"These authors, at least as much as anyone else, have made growth economics what it is today. They have now devoted time and effort into making that material broadly accessible. What more could we ask for?"
Abhijit V. Banerjee, Department of Economics, MIT
"A fascinating tour through the frontier research on economic growth with a key question: 'Which policies and institutions promote and which hinder the transition from poverty to prosperity?' The authors do not believe in one-size-fits-all recipes, and take the complexity of economic development into modern growth theory."
Fabrizio Zilibotti, Department of Economics, University of Zurich
"The Economics of Growth by Philippe Aghion and Peter Howitt is an excellent introduction to the exciting field of economic growth. It will challenge and motivate students and researchers."
Daron Acemoglu, Charles P. Kindleberger Professor of Applied Economics, MIT