MSc Financial Economics / Course details

The aim of the course is to provide rigorous training on the current research on a number of issues in development economics and growth theory: demographic transition and growth; public capital and growth; gender equality and growth; and middle-income traps. To do so presentations will dwell on a series of micro-founded, fully-articulated growth models, based on the overlapping generations (OLG) approach. The intuition behind key mathematical results, and their relevance for the real world, will be systematically emphasized.

The aim of the course is to provide rigorous training on the current research on a number of issues in development economics and growth theory: demographic transition and growth; public capital and growth; gender equality and growth; and middle-income traps. To do so presentations will dwell on a series of micro-founded, fully-articulated models, based on the overlapping generations (OLG) approach. The intuition behind key mathematical results, and their relevance for the real world, will be systematically emphasized.

Upon completion of this course, students will be able to:

a) develop a clear understanding of the current analytical literature in development economics on demographic transition and economic growth, public capital and growth, gender equality and growth, and middle-income traps;

b) evaluate critically some of the results in the literature, particularly those related to the role of public capital in the growth process, and the determinants of women’s time allocation;

c) develop simple OLG models of their own, from which they will be able to derive original results, and more generally acquire a set of analytical skills that may serve them well if they choose to pursue a PhD in Economics.

Provisional Syllabus  

Topic 1 (Lectures 1 to 2) - Demographic Transition, Occupational choice, and Development Traps  

These lectures will present a two-period OLG model with heterogeneous labor and exogenous growth, following a brief general introduction to this class of models. The model will be used to illustrate the links between occupational choice, the distribution of skills in the labor force, and demographic forces taking the form of fertility changes. After reviewing the stylized facts associated with the demographic transition and describing the structure of the model (behavioral functions and market equilibrium conditions), its solution and dynamic properties will be analysed.  

Background reading: M. Kimura and D. Yasui, "Occupational Choice, Educational Attainment, and Fertility," Economics Letters, 94 (February 2007), 228-34.  

Topic 2 (Lectures 3 and 4) - Public Capital and Growth  

These lectures will present a two-period OLG model focusing on the role of public capital (core infrastructure) in economic growth. It will consider first conventional productivity channels. New channels, including an impact on adjustment costs associated with private investment; an effect on the durability of private capital; an effect on the production (and availability) of health and education services; and network effects of infrastructure will be discussed next.  

Background reading: Agénor, Pierre-Richard, Public Capital, Growth, and Welfare, Princeton University Press (Princeton, NJ: 2012), Chapter 1, Sections 1 to 5.  

Topic 3 (Lectures 5, 6 and 7) - Women's Time Allocation, Gender Inequality, and Growth  

These lectures will discuss how women's time allocation changes in the process of development and how such changes affect growth and gender inequality over time. It will begin with some background evidence on gender disparities in developing countries. It will then examine factors affecting women's time allocation, with particular attention to the role of infrastructure. A gender-based OLG model (which builds on the model presented in Topic 2) will be presented and used to analyse the impact of public policy on women's time allocation (in terms of time devoted to household chores and market activity), growth, and gender inequality.  

Background readings: Agénor, Pierre-Richard, and Madina Agénor, "Access to Infrastructure, Women's time Allocation, and Economic Growth," unpublished, University of Manchester and Harvard University (March 2020). Duflo, Esther, "Women Empowerment and Economic Development," Journal of Economic Literature, 50 (December 2012), 1051-79.  

Topic 4 (Lectures 8, 9 and 10) - Middle-Income Traps  

These lectures will discuss the causes and policies to escape from a middle-income trap, generally characterized by a sharp deceleration ingrowth, following a period of sustained increases in per capita income. It will begin with some background evidence on the nature of middle-income traps. It will then provide a taxonomic review of the causes of these traps. It will present a simple OLG model with two types of infrastructure to illustrate how equilibrium traps, characterized by a misallocation of talent, can emerge. The implications for public policy will also be examined.  

Background reading: tbc. 

Lectures

Prior to the start of the class, students are encouraged to review key mathematical formulas provided in the following document:

Agénor, Pierre-Richard, Mathematical Formulas and Dynamic Optimization Techniques, unpublished, University of Manchester (January 2019).

This document will be uploaded on the course website a week before the course starts.