In every developed country, the economic transition from pre-industrial stagnation to modern growth was accompanied by a demographic transition from high to low fertility. Even though the overall pattern is repeated, there are large cross-country variations in the timing and speed of the demographic transition. What accounts for falling fertility during the transition to growth? To answer this question, this paper develops a unified growth model which delivers a transition from stagnation to growth, accompanied by declining fertility. The model is used to determine whether government policies that affect the opportunity cost of education can account for crosscountry variations in fertility decline. Among the policies considered, education subsidies have only minor effects, while accounting for child-labor regulations is crucial. Apart from influencing fertility, the policies also have large effects on the evolution of the income distribution in the course of development.

This paper develops a theory of fertility that offers an explanation for the persistence of poverty within and across countries. If educated individuals have a comparative advantage in raising educated children then parental fertility choice is shown to give rise to a poverty trap, in which the poor choose high fertility rates with low investment in child quality. Moreover, the impact of child quality choice on economic performance is amplified by the diluting effect of higher fertility on physical capital accumulation. The theory proposes insights regarding the effects of inequality, globalisation and life expectancy on economic growth and demographic transitions. This paper develops a theory of fertility and child educational choice that offers an explanation for the persistence of poverty within and across countries. The joint determination of the quality (education) and quantity of children in a household is studied under the key assumption that individuals ’ productivity as teachers increases with their own human capital. In contrast, the minimum time cost asso-ciated with raising a child regardless of the child’s quality – the quantity cost – is not affected by parental education. As a result, the price of child quantity relative to the price of child quality increases with individuals ’ wages. In particular, for low-wage

This paper presents a microfounded theory of long-term development. We model the interplay between economic variables, namely the process of human capital formation and technological progress, and the biological constraint of finite lifetime expectancy. All these processes affect each other and are endogenously determined. The model is analytically solved and simulated for illustrative purposes. The resulting dynamics reproduce a long period of stagnant growth as well as an endogenous and rapid transition to a situation characterized by permanent growth. This transition can be interpreted as industrial revolution. Historical and empirical evidence is discussed and shown to be in line with the predictions of the model. JEL-classification: E10, J10, O10, O40, O41 Keywords: Long-term development, endogenous life expectancy, heterogeneous human capital, technological change, industrial revolution ∗ The authors would like to thank Giuseppe Bertola, Antonio Ciccone, Adriana Kugler, Matthias Messner, Omar Licandro and Nicola Pavoni, as well as seminar participants at

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This paper challenges conventional wisdom by arguing that greater longevity may have contributed less than previously thought for the significant accumulation of human capital during the transition from stagnation to growth. This is because when parents make choices over the quantity and quality of their offspring, greater longevity positively affects not only the returns to quality but also the returns to quantity. The theory suggests that in contrast to longevity, improvements in health are more likely to generate quantityquality tradeoff. Finally, it shows the importance of controlling for fertility when empirically examining the impact of children’s health on their education.

Fundamental to the Malthusian model of pre-industrial society is the assumption that higher income increased reproductive success. Despite the seemingly inescapable logic of this model, its empirical support is weak. We examine the link between income and net fertility using data from wills on reproductive success, social status and income for England 1585–1638. We find that for this society, close to a Malthusian equilibrium, wealth robustly predicted reproductive success. The richest testators left twice as many children as the poorest. Consequently, in this static economy, social mobility was predominantly downwards. The result extends back to at least 1250 in England. A n essential component of the “Malthusian ” model of pre-industrial society as now used by economists to model a society in which incomes are kept at subsistence levels by the interaction of fertility and land supply is that population growth, birth rates minus death rates, increased with income per person. 1 This, combined with that of diminishing returns to labor as a factor of production, generates the long-run Malthusian equilibrium where wages are maintained at a subsistence level. 2 Figure 1 shows one drawing of how birth rates and death rates might vary with income to satisfy this key property. Once we have this then there is a subsistence income per person y*, which prevails in the long run.

and three anonymous referees raised questions and gave comments that greatly improved the paper. Participants in many conferences and seminars gave helpful comments. Dalit Engelhardt, Dan

This paper provides a framework relating the vertical transmission of characteristics across generations- such as the transmission of culture, language, norms and values- to differences in income per capita across countries. We propose a novel way to measure cultural barriers using genetic distance, i.e. coancestor coefficients from population genetics. Our econometric methodology addresses the problem of spatial correlation inherent in having pairwise income differences as our dependent variable. We find a significant effect of genetic distance on income differences, even when controlling for geographical distance, differences in latitude, and other cultural and geographic distance measures. These results hold not only for contemporary income differences, but also for income differences measured as of 1500 and 1700. We uncover similar patterns of coefficients for the proximate determinants of income differences (differences in human capital, institutions, investment rates and population growth). Our results suggest an important role for vertically transmitted characteristics in the diffusion of development.

This research argues that the rapid expansion of international trade in the second phase of the industrial revolution has played a major role in the timing of demographic transitions across countries and has thereby been a significant determinant of the distribution of world population and a prime cause of the ‘Great Divergence ’ in income per capita across countries in the last two centuries. The analysis suggests that international trade had an asymmetrical effect on the evolution of industrial and non-industrial economies. While in the industrial nations the gains from trade were directed primarily towards investment in education and growth in output per capita, a significant portion of the gains from trade in non-industrial nations was channeled towards population growth.

Why did England industrialize first? And why was Europe ahead of the rest of the world? Unified growth theory in the tradition of Galor and Weil (2000, American Economic Review, 89, 806–828) and Galor and Moav (2002, Quartely Journal of Economics, 177(4), 1133–1191) captures the key features of the transition from stagnation to growth over time. Yet we know remarkably little about why industrialization occurred much earlier in some parts of the world than in others. To answer this question, we present a probabilistic two-sector model where the initial escape from Malthusian constraints depends on the demographic regime, capital deepening and the use of more differentiated capital equipment. Weather-induced shocks to agricultural productivity cause changes in prices and quantities, and affect wages. In a standard model with capital externalities, these fluctuations interact with the demographic regime and affect the speed of growth. Our model is calibrated to match the main characteristics of the English economy in 1700 and the observed transition until 1850. We capture one of the key features of the British Industrial Revolution emphasized by economic historians — slow growth of output and productivity. Fertility