Population, Technology, and Growth: From Malthusian

Stagnation to the Demographic Transition and Beyond

By Oded Galor and David Weil

Discussant: Wang Xiongjian

Oct 3, 2004

History of development

• Three regimes of economic development:

• Malthusian regime:

- slow technological progress;

- sustained rise in income per capita is prevented by population growth;

History of development

• Three regimes of economic development:

• Post-Malthusian regime:

- Technological progress rises;

- population growth absorbs part of growth;

History of development

• Three regimes of economic development:

• Modern Growth regime:

- the relationship between income and population growth is not positive any more;

- reduced population growth;

- sustained income growth;

History of Theories

• Thomas T. Malthus (1798):

- population growth and income;

- Key assumptions: fixed supply of some factor of production; positive effect of the standard of living on the growth rate of population;

- low living standards and population growth; technological differences are related to population density, rather than standard of living;

- consistent with most of human history;

History of Theories

• Kremer (1993):

- transition from Malthusian equilibrium to the post Malthusian regime: a feedback loop between technology and population;

• Lucas (1999):

- Malthusian model: households optimizes over consumption and fertility;

History of Theories

• Neo-classical growth models:

- exogenous population growth;

• Robert Barro and Gary Becker (1989):

- negative relation between income and population growth;

…

Aim of the paper

• To develop a unified growth model that captures the historical evolution of population growth, technological change, and output (standard of living).

• Focuses: behavior of income per capita, and the relationship between the level of income per capita and the growth rate of population.

Setup of the model

• Key assumptions: - parents switch out of quantity and into

quality of children, not in respond to the level of income, but rather in response to technological progress (because of positive effect on return to education); ( to explain why the reduction in fertility allows income per capita to rise so far above subsistence) technology take-off;

Setup of the model

• Key assumptions:

- positive effect of technological progress on the return to human capital (education) ; ( Theodore W. Schultz (1964) )

- the choice of parents regarding the education level of their children affects the speed of technological progress;

Setup of the model

• Key assumptions:

- positive effect of the size of the population on the rate of technological progress (in order to take-off fro the Malthusian regime) ;

- the existence of fixed factor of production, land and a subsistence level of consumption;

Evolution of the economy

• Malthusian:

- population growth: low g: small no incentive to increase e globally stable conditional Malthusian S.S. equilibrium: 1) constant resources per capita; 2)slow tech. progress; 3) no education;

• Overtime, slow growth in population raises the rate of technological progress

Evolution of the economy

• Post-Malthusian:

- tech. progress has two effects on population: 1) increases the fraction of parents’ time to raise children by raising potential income (effect of tech. on budget constraint ); 2) lowers the rate of pop. growth by inducing parents to give their children more education; economy eventually crosses the Malthusian frontier

Evolution of the economy

• Modern growth:

- tech. progress does not have effect of changing the amount of time devoted to child-rearing, but continue to raise the quantity of education that parents give each child pop. growth falls, education and tech. progress rise.

Comments

• This paper builds a unified and delicate model to explain the transition from Malthusian stagnant to Modern growth;

• Explains some stylized facts in economic development, and provides a possible analysis framework to find out what factors may be crucial to economic development;

Comments

• However, the conclusions are based on too many strict assumptions, some of which may be untenable;

- e.g.

• Therefore, the power of for explaining and prediction is weakened;

- e.g. why didn’t the industrial revolution happen in 16th century’s China?

The End