Advanced Economic Growth: Lecture 23: Structural Transformations and Market Failures in Development (Part 1)¶
Daron Acemoglu (2007). Advanced Economic Growth: Lecture 23: Structural Transformations and Market Failures in Development (Part 1). MIT Advanced Economic Growth lecture notes. MIT.
| Type | other |
| Scope | Comparative and methods |
| Method | theoretical or conceptual |
| Period studied | - |
| Themes | comparative theory, demography urbanisation, education human capital, inequality poverty unemployment |
| Citation key | acemoglu2007 |
Argument¶
The lecture treats development as structural transformation, driven either by constraints on capital and technology or by market failures. It builds stylised models of financial deepening, the demographic transition, rural-urban migration and the dual economy, and changes in firm organisation as an economy approaches the technology frontier. Financial development and growth move together and produce a Kuznets-type inequality pattern. Slow migration or community-enforcement advantages can slow development. Growth-maximising strategies shift from imitation to innovation, but incumbents' protection can cause sclerosis or a non-convergence trap. Government intervention can help temporarily but may backfire. The text contains no South African material.
Evidence and method¶
No empirical evidence is analysed. The lecture is purely theoretical: overlapping-generations and Malthusian models, a Lewis-type dual economy, and a Dixit-Stiglitz growth model. It cites Maddison (2002) population data in a figure, and the models draw on Banerjee and Newman (1998), Acemoglu and Zilibotti (1999) and Acemoglu, Aghion and Zilibotti (2006).
Findings¶
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There is little direct evidence for the quality-quantity trade-off or consensus on the causes of the demographic transition. (p. 33)
No general consensus on the causes of the demographic transition or on the role of the quality-quantity tradeo¤.
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In the Malthusian model consumption converges to a level set by preferences and technology, not biological subsistence. (p. 24)
no biologically determined subsistence level of consumption.
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In the Lewis-type dual economy model, slow migration slows reallocation and output gains despite higher urban wages. (p. 43)
If µ is low reallocation of workers will be slow despite the higher wages.
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The Lewis-style model is critiqued because migration is reduced-form and many developing economies have overpopulated cities. (p. 43)
Flavor of too little migration, but many less-developed economies urban overpopulated.
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Rural community-enforcement advantages slow technological change and migration, producing S-shaped transitions. (p. 50)
Greater is ξ, slower technological change and migration.
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The growth-maximising strategy starts with imitation and switches to innovation as the economy nears the frontier. (p. 67)
Growth-maximizing sequence of strategies: start with R = 1 and then switch to R = 0.
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Policies encouraging imitation can condemn an economy to a non-convergence trap. (p. 76)
Encouraging imitation-based growth, may appear as a good policy but condemns economy to non-convergence.
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Government intervention helps only temporarily and may backfire without precise information. (p. 77)
Unless there is precise information and a way of reversing policies protecting incumbents, government interventions might back…re.