Malthus to Solow

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.... [The authors] use a standard growth model with...[several] technologies. The first, denoted the 'Malthus' technology, requires land, labor and reproducible capital as inputs. The second, denoted the 'Solow' technology, does not require land. [The authors] 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."