Economics II: Economics of growth and climate change

The paramount role of economic growth. It is difficult to imagine a social phenomenon that matters more for the lives of people than long-term economic growth. For millennia, nearly all people throughout the world lived on subsistence levels. Within a few centuries, per-capita income in some regions of the world increased maybe 100-fold, while in others no sustained economic growth occurred. Come countries, however, have caught up dramatically within few decades. Describing and explaining these patterns is the realm of theories of economic growth and development.

Learning objectives. Students will be introduced in the empirical patterns of long-term economic growth and development, theories explaining these patterns, and statistical analyses to test such theories. One crucial aspect will be the viability of economic growth under the limitations set by climate change, i.e. the sustainability of growth under environmental constraints. At the end of the course, students will understand the most important economic theories and models of economic growth, including their crucial assumptions and weaknesses; see what we can and what we cannot learn growth regressions; and be able to evaluate long-term policies, such as climate policy, in a framework of economic growth.

Topics. In this course, we will cover the following topics: historical empirical patterns of long-term economic growth and development, accumulation of physical capital as a growth engine, the role of human capital, quantify the drivers of growth through growth accounting, the Solow model of economic growth, the Ramsey model of economic growth, long-term discounting, constrained optimization as an analytical tool, ideas as the engine of economic growth, endogenous growth models, empirical growth regressions, econometric techniques to identify causal drivers of growth, the role of institutions and policies, the growth-inequality-poverty nexus, accounting for human well-being beyond GDP, physics of climate change, observations and impacts of climate change, economics of climate change sustainability of and limits to growth in the presence of limited natural resources.

Prerequisites: Economics I

This course is for 1st year MIA and MPP students only.


  • Lion Hirth , Assistant Professor of Governance of Digitalisation and Energy Policy