Malthus to Solow

26 Pages Posted: 3 Feb 1999 Last revised: 12 Oct 2010

See all articles by Gary D. Hansen

Gary D. Hansen

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Edward C. Prescott

Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER)

Date Written: December 1998

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.

Suggested Citation

Hansen, Gary D. and Prescott, Edward C., Malthus to Solow (December 1998). NBER Working Paper No. w6858. Available at SSRN: https://ssrn.com/abstract=144950

Gary D. Hansen (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States
310-825-3847 (Phone)
310-825-9528 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Edward C. Prescott

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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