Macroeconomic Theory II Winter 2008 Louis Hotte University of Ottawa

First part Long Run Macroeconomics

Introduction A world of contrast

Over types of challenges  Developing countries (DC): 826 millions undernourished 1 billion without access to safe drinking water 2,4 billion without sanitation  Industrialized countries (IC): Obesity

Of life and death Life expectancy according to UN definition of Human Development (HD): 1.1 billion with high HD: 77 years 4.05 billion with middle HD: 67 years 840 million with low HD: 53 years

Of command over resources  Cars/1000 individuals: Rich countries: 443 Poor countries: 9  Phone lines/1000 individuals: Canada: 677 Bangladesh: 4  Africa: World population: 13% Electric power consumption: 2.9%  USA: World population: 5% Electric power consumption : 25%

Of inequality  20% richest receive 62% of world income  1.2 billion individuals live on less than 1$/day.  Between 2.5 and 3 billion on less than 2$/day.

Why?  Does it have to be like that?  Can we understand what causes such contrasts?  If so, can we do something about it?  Or does the wealth of some rely on the poverty of others?

The study of long run macroeconomics: Objectives for this course (1)  Answer (partially) the questions on previous slides, given current state of knowledge.  (Begin to) understand why some countries are rich while others are poor.  (Begin to) understand why some countries grow fast and others not.

The study of long run macroeconomics: Objectives for this course (2)  Acquire a sense of how those questions can be analyzed with rigor and science, i.e. with Sound and enlightening theory Rich data and observations from across the world and historical Quantitative perspective (direction and magnitude of effects) Attempt to include latest advancements in knowledge