Working Paper: NBER ID: w7375
Authors: Charles I. Jones
Abstract: This paper studies a growth model that is able to match several key facts of economic history. For thousands of years, the average standard of living seems to have risen very little, despite increases in the level of technology and large increases in the level of the population. Then, after thousands of years of little change, the level of per capita consumption increased dramatically in less than two centuries. Quantitative analysis of the model highlights two factors central to understanding this history. The first is a virtuous circle: more people produce more ideas, which in turn makes additional population growth possible. The second is an improvement in institutions that promote innovation, such as property rights: the simulated economy indicates that the single most important factor in the transition to modern growth has been the increase in the fraction of output pain to compensate inventors for the fruits of their labor.
Keywords: economic growth; industrial revolution; property rights; innovation; population
JEL Codes: O40; E10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decline in total factor productivity (O49) | shock affecting growth (O41) |
| improved property rights (P14) | increased compensation for inventors (O31) |
| increased compensation for inventors (O31) | enhanced production of new ideas (O36) |
| improved property rights (P14) | enhanced production of new ideas (O36) |
| larger population base (J19) | increased idea production (O36) |