Was Malthus Right? Economic Growth and Population Dynamics

Abstract

This paper studies the relationship between population dynamics and economic growth. Prior to the Industrial Revolution increases in total output were roughly matched by increases in population. In contrast, during the last 150 years, increments in per capita income have coexisted with slow population growth. Why are income and population growth no longer positively correlated? Thus paper presents a new answer, based on the role of capital-specific technological change, that provides a unifying account of lower population growth and sustained economic growth. An overlapping generations model with capital skill, complementarity rued endogenous fertility, mortality and education is constructed and parameterized to match English data from 1536 to 1920. The key finding is that the observed fall in the relative price of capital can account for more than 60% of the fall ill fertility mid over 50 of the increase in income per capita, in England occurred during the demographic transition. Additional experiments show that neutral technological change or the reduction in mortality cannot account for the fall in fertility.