On the Origin and Causes of Economic Growth

Ananth Seshadri and Nicolas Roys
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Ananth Seshadri: University of Wisconsin

No 310, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: This paper presents a model of human capital accumulation to better understand the take-off from stagnation to growth from 1500 to 2000 AD. Finitely lived households choose the quantity and quality of children. The key ingredient of the model is a spillover from parents to children in the accumulation of human capital. Depending on the size of the spillover, the model can generate protracted transitions. Starting from an initial level of human capital, the economy can take centuries to reach 95% of the steady state output per capita with a half-life of around 250 years. The model can rationalize the demographic transition as well as the industrial revolution without resorting to exogenous changes in productivity. It is consistent with the changing cross-sectional relationship between income and fertility as well as the decline in the concentration of wealth. Macro evidence on convergence as well as micro evidence on the impact of parental education on children's earnings lend support to our formulation.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:310

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