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Malthus to Solow

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  • Gary D. Hansen
  • Edward C. Prescott

Abstract

A unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies. Our theory also explains the industrial revolution, which is the transition from an era when per capita incomes are stagnant to one with sustained growth. This transition is inevitable given positive rates of total factor productivity growth. We use a standard growth model with one good and two available technologies. The first, denoted the capital as inputs. The second, denoted the does not require land. We show that in the early stages of development, only the Malthus technology is used and, due to population growth, living standards are stagnant despite technological progress. Eventually, technological progress causes the Solow technology to become profitable and both technologies are employed. At this point, living standards improve since population growth has less influence on per capita income growth. In the limit, the economy behaves like a standard Solow growth model.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6858.

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Date of creation: Dec 1998
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Publication status: published as Hansen, Gary D. and Edward C. Prescott. "Malthus To Solow," American Economic Review, 2002, v92(4,Sep), 1205-1217.
Handle: RePEc:nbr:nberwo:6858

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  1. Karine S. Moe, 1998. "Fertility, Time Use, and Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 699-718, July.
  2. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
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  6. Goodfriend, Marvin & McDermott, John, 1995. "Early Development," American Economic Review, American Economic Association, vol. 85(1), pages 116-33, March.
  7. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
  8. Galor, Oded & Weil, David N, 1996. "The Gender Gap, Fertility, and Growth," American Economic Review, American Economic Association, vol. 86(3), pages 374-87, June.
  9. Charles I. Jones, . "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," Working Papers 99008, Stanford University, Department of Economics.
  10. Gary S. Becker, 1960. "An Economic Analysis of Fertility," NBER Chapters, in: Demographic and Economic Change in Developed Countries, pages 209-240 National Bureau of Economic Research, Inc.
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  12. Laitner, John, 2000. "Structural Change and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 545-61, July.
  13. Arifovic, Jasmina & Bullard, James & Duffy, John, 1997. " The Transition from Stagnation to Growth: An Adaptive Learning Approach," Journal of Economic Growth, Springer, vol. 2(2), pages 185-209, July.
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Blog mentions

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  1. How much inequality would Plato tolerate?
    by YouNotSneaky! in YouNotSneaky on 2007-05-15 01:59:00
  2. Ed Prescott to Speak at ANU
    by noreply@blogger.com (David Stern) in Stochastic Trend on 2014-07-29 02:46:00
  3. Unified Growth Theory
    by ? in Graduate Economist on 2012-04-19 12:00:00
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