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How Substitutable are Fixed Factors in Production? Evidence from Pre-industrial England

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  • Joshua Wilde

    () (Department of Economics, University of South Florida)

Abstract

The extent to which fixed factors of production such as land constrain per-capita income growth has been a widely discussed topic in economics since at least Malthus (1798). Whether fixed factors limit growth depends crucially on two variables: the substitutability of fixed factors in production, and the extent to which innovation will be biased towards land-saving technologies. However, there are few estimates of either variable, and most models assume this elasticity of substitution is unity out of con- venience. This paper attempts to fill that gap in the literature. Using the timing of plague epidemics as an instrument for labor supply, this paper estimates the elasticity of substitution between fixed and non-fixed factors in pre-industrial England. I find that the elasticity of substitution between land and other factors during this period was signicantly less than one, which implies that the Malthusian effects of population on income were stronger than current models predict. In addition, I am able to esti- mate the direction and magnitude of induced innovation. I find evidence that denser populations -- and hence higher land scarcity -- induced innovation towards land-saving technologies. Specically, I find that a doubling of population density in England from its year 1500 level raises the difference in the growth rates of land- and labor-enhancing productivity by 0.22% per year.

Suggested Citation

  • Joshua Wilde, 2013. "How Substitutable are Fixed Factors in Production? Evidence from Pre-industrial England," Working Papers 0113, University of South Florida, Department of Economics.
  • Handle: RePEc:usf:wpaper:0113
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    References listed on IDEAS

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    Cited by:

    1. Bruno Lanz & Simon Dietz & Timothy Swanson, 2017. "Global Population Growth, Technology, And Malthusian Constraints: A Quantitative Growth Theoretic Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 973-1006, August.
    2. Fouka, Vasiliki & Schlaepfer, Alain, 2017. "Agricultural Returns to Labor and the Origins of Work Ethics," MPRA Paper 78556, University Library of Munich, Germany.
    3. T. Ryan Johnson & Dietrich Vollrath, 2017. "How Tight are Malthusian Constraints?," Working Papers 2017-192-55, Department of Economics, University of Houston.
    4. repec:eee:ecolec:v:144:y:2018:i:c:p:260-277 is not listed on IDEAS
    5. Bruno Lanz & Simon Dietz & Timothy Swanson, 2016. "Economic growth and agricultural land conversion under uncertain productivity improvements in agriculture," CIES Research Paper series 43-2016, Centre for International Environmental Studies, The Graduate Institute.
    6. Lanz, Bruno & Dietz, Simon & Swanson, Tim, 2018. "The Expansion of Modern Agriculture and Global Biodiversity Decline: An Integrated Assessment," Ecological Economics, Elsevier, pages 260-277.

    More about this item

    Keywords

    Land; Substitution; Population; England; Industrial Revolution; Demographic Transition; Induced Innovation; Plagues; Malthus;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913
    • N53 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Europe: Pre-1913
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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