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IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Comparative Economic Development:Insights from Unied Growth Theory
Oded Galor
Department of EconomicsBrown University
Klein Lecture, Osaka, June 5th, 2008
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Outline
Introduction
Historical Evidence
Unied Growth Theory
Implications for Comparative Development
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
The Complexity of the Process of Development
The Malthusian Epoch
Developed Countries 100; 000 BCE - 1750Less Developed Economies 100; 000 BCE - 1900
The Post Malthusian Regime
Developed Countries 1750 - 1870Less Developed Economies 1900 -
The Modern Growth Regime
Developed Countries 1870 - presentLess Developed Economies
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
Major Puzzles
Context: The Malthusian Epoch
What accounts for the epoch of stagnation that characterizedmost of human history?
Why had episodes of technological progress in the pre-industrializationera failed to generate sustained economic growth?
Why has population growth counterbalanced the expansion ofresources per capita that could have been generated by tech-nological progress?
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
...Major Puzzles
Context: The Transition from Stagnation to Growth
What is the origin of the sudden spurt in growth rates of outputper capita and population?
What triggered the demographic transition?
Would the transition to a state of sustained economic growthhave been feasible without the demographic transition?
What are the underlying behavioral and technological structuresthat account for the distinct phases of development and whatare their implications for the contemporary growth process ofdeveloped and underdeveloped countries?
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
...Major Puzzles
Context: Comparative Development
What accounts for the sudden take-o¤ from stagnation to growthin some countries and the persistent stagnation in others?
Why has the positive link between income and population growthreversed its course in some economies but not in others?
Why have the di¤erences in per capita income across countriesincreased so markedly in the last two centuries?
Has the transition to a state of sustained economic growth inadvanced economies adversely a¤ected the process of develop-ment in less-developed economies?
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
Inconsistency of non-UGT with the Growth Process
Inconsistent with the qualitative aspects of the growth processduring the Malthusian epoch and the Post-Malthusian Regime
Limited to the modern growth regime a small fraction of theentire process of development
Do not capture the forces that brought about the transition ofdeveloped countries from stagnation to growth and hence un-able to shed light of the hurdles faced by LDCs in their attemptto take-o¤ to a state of sustained economic growth
Unable to capture fundamental aspects of sustained di¤erencesin income per-capita across countries
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
Lessons from other Scientic Disciplines
Theories that are founded on the basis of a subset of existingobservations and their driving forces, may be attractive in theshort run, but non-robust and ultimately non-durable in thelong run:
Classical Thermodynamics:
Lacks micro-foundations - has been ultimately superseded bythe micro-based Statistical Mechanics
Unied Field Theory
Proposes to unify by general laws the four distinct forces thatcontrol observed interactions in matter: electromagnetism, grav-itation, the weak force, and the strong force
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
...Lessons from other Scientic Discipline
Attempts to develop unied theories in Physics have been basedon the conviction that all physical phenomena should ultimatelybe explainable by some underlying unity
The entire process of development and its fundamental forcesought to be captured by a unied growth theory
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
Virtues of Unied Growth Theory
Sheds light on historical and contemporary patterns of devel-opment
Identies the forces the permitted the currently developed econ-omy to transit from an epoch of Malthusian stagnation to sus-tained economic growth
Uncovers the hurdles faced by LDCs in their transitions fromstagnation to growth
Derives policies that may expedite the transition of LDCs tosustained economic growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Complexity of the Process of DevelopmentMajor PuzzlesInconsistency of Non-Unied Growth Theories with the Growth ProcessLessons from other Scientic DisciplinesVirtues of Unied Growth Theory
...Virtues of Unied Growth Theory
Demonstrates the critical role played by the demographic tran-sition and the emergence of the demand for human capital inthe shift to modern growth
Identies the micro-foundations - the central driving forces - forthe main aspects of the growth process
provides a meta-theory that naturally encompasses existing hy-pothesis about the role of geography, institutions, and the com-position of human traits, in comparative development
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Historical Evidence
The Malthusian Epoch
The Post-Malthusian Regime
The Sustained-Growth Regime
The Great Divergence
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
World Income per Capita: 0-2000
GDP Per Capita
300
1300
2300
3300
4300
5300
6300
0 250 500 750 1000 1250 1500 1750 2000
GDP
Per
Cap
ita(1
990
Int'l
$)
6049409121111525875667615595566436445GDP20011973195019131870182017001600150010000Year6049409121111525875667615595566436445GDP20011973195019131870182017001600150010000Year
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Regional Income per Capita, 0-2000
0
4000
8000
12000
16000
20000
24000
0 250 500 750 1000 1250 1500 1750 2000
GD
P P
er C
apita
(199
0In
t'l $
)
Western Europe Western Offshoots AsiaLatin America Africa Eastern Europe
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Inequality in Income Per Capita, 0-2000
26,943
1202
400
400
WesternOffshoots
3861
581
450
450
Asia
18 : 11,4896,15019,2652001
3 : 14186921,2041820
1.1 : 14164004001000
1.1 : 14254004500
Ratio:Rich/Poor
AfricaLatinAmerica
WesternEurope
Year
26,943
1202
400
400
WesternOffshoots
3861
581
450
450
Asia
18 : 11,4896,15019,2652001
3 : 14186921,2041820
1.1 : 14164004001000
1.1 : 14254004500
Ratio:Rich/Poor
AfricaLatinAmerica
WesternEurope
Year
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
The Malthusian Epoch
Economies are in a Malthusian stagnation:
Population growth is positively a¤ected by the level of incomeper capita
Technological progress exits but it is slow and it results in aproportional increase in output and population
Output per capita uctuates around a subsistence level
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Malthusian Fluctuations in GDP Per Capita:England, 1260-1870
40
50
60
70
80
90
100
110
12609 13609 14609 15609 16609 17609 18609
Rea
l GD
P Pe
r Cap
ita(1
860
100)
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Malthusian Relationship between World Income andPopulation
0
1000
2000
3000
4000
5000
6000
0 500 1000 1500 2000
GD
P Pe
r Cap
ita
0
1
2
3
4
5
6
7
8
Popu
latio
n
GDP Per Capita (1990 Int's Dollars) Population (in Billions)
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Malthusian Relationship between World Income andPopulation Growth
0
1000
2000
3000
4000
5000
6000
1300 1400 1500 1600 1700 1800 1900 2000
GD
P Pe
r Cap
ita
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Rat
e of
Pop
ulat
ion
Gro
wth
GDP Per Capita (1990 Int'l $) Population Growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Malthusian Relationship between Income and Population:England 1250-1750
0
20
40
60
80
100
120
140
160
180
200
1255 1295 1335 1375 1415 1455 1495 1535 1575 1615 1655 1695 1735
Rea
l Far
m W
ages
(177
5=10
0)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
Pop
ulat
ion (
milli
ons)
Population
Real Wages
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Testable Implications
Variations in technology and land quality across countries willbe reected primarily in variation in population density:
Technological superiority will result primarily in higher popula-tion density without any sizable e¤ect on income per-capita inthe long-run
Superior land quality will result primarily in higher populationdensity without any sizable e¤ect on income per-capita in thelong-run
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Timing of Neolithic and Population Density in 1500 CE
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Land Productivity and Population Density in 1500 CE
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
The Post-Malthusian Regime
Economies take-o¤ from a Malthusian equilibrium:
Population growth is still positively a¤ected by the level of in-come per capita
Technological progress accelerates and it results in a larger in-crease in output than in population
Demand for education increases towards the end of the period
Income per capita and population grow at an increasingly fasterpace
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Take-o¤ in World Income Per Capita
GDP Per Capita
300
1300
2300
3300
4300
5300
6300
0 250 500 750 1000 1250 1500 1750 2000
GDP
Per
Cap
ita(1
990
Int'l
$)
6049409121111525875667615595566436445GDP
20011973195019131870182017001600150010000Year
6049409121111525875667615595566436445GDP
20011973195019131870182017001600150010000Year
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Regional Variations in the Timing of the Take-o¤ (Levels):Early Take-O¤
0
4000
8000
12000
16000
20000
24000
28000
1700 1750 1800 1850 1900 1950 2000
GDP
Per C
apita
(199
0 Int'
l $)
Western Europe Western Offshoots
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Regional Variations in the Timing of the Take-o¤: (Levels)Late Take-O¤
0
1000
2000
3000
4000
5000
6000
1700 1750 1800 1850 1900 1950 2000
GDP
Per C
apita
(199
0 Int'
l $)
Asia Latin America Africa
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Growth of GDP Per Capita and Population:Western Europe, 1500-2000
Western Europe
0
0.5
1
1.5
2
2.5
3
1500 1600 1700 1800 1900 2000
Perc
ent G
row
th R
ates output growthpopulation growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Growth of GDP Per Capita and Population:Western O¤shoots, 1500-2000
Western Offshoots(US, Canada, Australia, New Zeland)
0
0.5
1
1.5
2
2.5
3
1500 1600 1700 1800 1900 2000
Perc
ent G
rowt
h R
ates
output growthpopulation growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Growth of GDP Per Capita and Population:Latin America 1500-2000
Latin America
0
0.5
1
1.5
2
2.5
3
1500 1600 1700 1800 1900 2000
Perc
ent G
row
th R
ates
output growthpopulation growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Growth of GDP Per Capita and Population:Africa 1500-2000
Africa
0
0.5
1
1.5
2
2.5
3
1500 1600 1700 1800 1900 2000
Perc
ent G
rowt
h Rate
s
output growthpopulation growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Industrialization: Less Developed Economies
Asia (excluding Japan)
0
0.6
1.2
1.8
2.4
3
3.6
1500 1600 1700 1800 1900 2000
Perce
nt G
rowt
h Rate
s
output growthpopulation growth
0
100
200
300
400
500
600
700
1750 1800 1850 1900 1950 2000
Per C
apita
Indu
stria
lizat
ion
.
USA Germany Canada United Kigdom France Japan
1
6
11
16
21
26
31
36
41
1750 1800 1850 1900 1950 2000
Per C
apita
Indu
stria
lizat
ion .
Third World India China Mexico
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
The Modern Growth Regime
Sustained economic growth:
Technological progress accelerates
Human capital becomes a major factor of production
Population growth declines The Demographic Transition
Gains in total output are not counterbalanced by populationgrowth
Output per capita grows at a high sustainable level
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
The Rise in the Demand for Human Capital
The acceleration in the rate of technological progress increasedthe demand for human capital
The rise in the demand for human capital induced a substitu-tion of quality for quantity of children triggering a demographictransition
The demographic transition should be observed at the sametime period across economies, that may di¤er in their levelsof incomes per capita, but are similar in their growth rates ofincome per capita
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
...The Rise in the Demand for Human Capital
0.00%
1.00%
2.00%
England Germany Sweeden Finland
Annual Growth Rates of Income PerCapita 18701913
18
22
26
30
34
38
42
1670 1720 1770 1820 1870 1920
Cru
de B
irth
Rat
es(p
er10
00)
England France Sweden Finland Germany
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
...The Rise in the Demand for Human Capital
10
15
20
25
30
35
40
1720 1740 1760 1780 1800 1820 1840 1860 1880 1900 1920 1940
CBR
and
CD
R(p
er10
00)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Frac
tion
of C
hild
ren
Age
514
in S
choo
l
Crude Death Rate
Crude Birth Rate
Fraction of Children Age 514 in Primary School
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Timing of the Demographic Transition across Regions:Early Transition
Early Demographic Tansition
0
0.5
1
1.5
2
2.5
3
1750 1800 1850 1900 1950 2000
Rate
of P
opul
atio
n G
rowt
h
Western Europe Western Offshoots Eastern Europe
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Timing of the Demographic Transition across Regions:Late Transition
Late Demographic Transition
0
0.5
1
1.5
2
2.5
3
1750 1800 1850 1900 1950 2000
Rat
e of
Pop
ulat
ion
Gro
wth
Latin America Asia Africa
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Variations in the timing of the Transition: The GreatDivergence: Income per Capita
0
4000
8000
12000
16000
20000
24000
28000
1820 1870 1913 1950 1998
GDP
PerC
apita
Western Offshoots
Western Europe
Latin America
AsiaAfrica
Eastern Europe
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
The Great Divergence in Population:Africa and Latin America Vs. Western Europe
0
200
400
600
800
1870 1890 1910 1930 1950 1970 1990
Pop
ulat
ion
(Mill
ions
)
W estern Europe Latin Am erica A frica
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Sustained Economic Growth:Western Europe and Western O¤shoots, 1870-2001
0
900
1800
2700
3600
1870 1890 1910 1930 1950 1970 1990
Pop
ulat
ion(
Mill
ions
)
Western Europe Asia
1870 1890 1910 1930 1950 1970 1990
Log
GD
P Pe
r Cap
ita
Western Europe Western Offshoots
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Malthusian EpochThe Post-Malthusian RegimeThe Modern Growth Regime
Growth of Income Per Capita:Africa, Asia and Latin America, 1950-2001
1950 1960 1970 1980 1990 2000
Log
GD
P P
er C
apita
Asia
Africa
Latin America
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
Contributions
Underlying Philosophy:"Towards a Unied Theory of Economic Growth: Oded Galor on theTransition from Malthusian Stagnation to Modern EconomicGrowth," An interview by Brian Snowdon (World Economics 2008)
Foundations:Galor (HB of Ec. Growth, 2005), Galor and Weil (AER 1999, 2000)
Extensions:Hansen and Prescott (AER 2002), Lagerlof (IER (2003), Boucekkine,de la Croix and Peeters (JEEA 2006), ORourke, Rhaman and Taylor(2007)
Human Evolution and Economic Development:Galor and Moav (QJE 2002, 2007), Galor and Michalopolous (2006),Ashraf and Galor (2008)
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
...Main Contributions
UGT and Comparative Development:Galor and Mountford (AER 2006, RES 2008), Galor, Moav and Voll-rath (RES 2008), Voigtländer and Voth (JEG 2006), Ashraf and Galor(2007)
Calibrations:Jones (2001), Doepke (JEG 2004), Lagerlof (RED, 2006), Fernandez-Vilaverde (2005)
Historical Evidence and EvaluationsLucas (2002), Broadberry (2007), Crafts and Mills (2007), Mokyrand Voth (2007)
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
The Fundamental Challenges
Development of a unied growth theory that accounts for:
An epoch of Malthusian stagnation
Take-o¤ to a Post-Malthusian Regime
Emergence of human capital formation
Demographic transition
A shift to sustained economic growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
...The Fundamental Challenges
Two dimensions of unication:
Unifying the entire process of development
Unifying the micro structure of the economy(i.e., the structure of preferences and technologies remain un-changed, but endogenous changes in the economic environmenttriggers di¤erent choices in di¤erent stages of development)
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
...The Fundamental Challenges
A dynamical system that permits an escape from a stableMalthusian Steady-State:
A major shock in an environment characterized by multiple lo-cally stable equilibria(inconsistent with evidence of a gradual transition (Crafts))
A gradual escape from an absorbing (stable) equilibrium(contradiction to the essence of a stable equilibrium)
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
...The Fundamental Challenges
Methodological innovation:
Phase transition via the evolution of latent state variables thatultimately a¤ects the qualitative properties of the dynamicalsystem
Although output per capita remains unchanged, the evolutionof latent state variables (technology and population) ultimatelychanges the dynamical system qualitatively, the Malthusianequilibrium vanishes endogenously, leaving the arena to thegravitational forces of the emerging Sustained Growth Regime
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
Major Puzzles Resolved by UGT
Context: The Transition from Stagnation to Growth
What accounts for the epoch of stagnation that characterizedmost of human history?
What is the origin of the sudden spurt in growth rates of outputper capita and population?
Why had episodes of technological progress in the pre-industrializationera failed to generate sustained economic growth?
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
...Major Puzzles Resolved by UGT
Context: The Transition from Stagnation to Growth
What triggered the demographic transition?
Would the transition to a state of sustained economic growthhave been feasible without the demographic transition?
What are the underlying behavioral and technological structuresthat could simultaneously account for these distinct phases ofdevelopment and what are their implications for the contem-porary growth process of developed and underdeveloped coun-tries?
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
...Major Puzzles Resolved by UGT
Context: The Great Divergence
What accounts for the sudden take-o¤ from stagnation to growthin some countries and the persistent stagnation in others?
Why has the positive link between income and population growthreversed its course in some economies but not in others?
Why have the di¤erences in per capita income across countriesincreased so markedly in the last two centuries?
Has the transition to a state of sustained economic growth inadvanced economies adversely a¤ected the process of develop-ment in less-developed economies
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
Suggestive Evidence: Characteristics of the MainTransitions
Transition from Malthusian to Post-Malthusian Regime:
Faster rates of technological progressFaster rate of population growth
Transition from the Post-Malthusian to Modern Growth Regime:
Faster rate of technological progressFaster rate of human capital accumulationDecline in population growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
ContributionsThe Fundamental ChallengesMajor PuzzlesSuggestive Evidence: Characteristics of the Main Transitions
Suggestive Evidence
A solution to these fundamental puzzles may be hidden there-fore in the understanding of how:
changes in the technological environment a¤ects the populationsize and its quality.
the size and the quality of the population a¤ect the rate oftechnological progress
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence ClubsMain Elements
The Malthusian Structure
Sources of Technological Progress
Origins of Human Capital Formation
Triggers of the Demographic Transition
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence ClubsThe Malthusian Structure
A subsistence consumption constraint
Positive e¤ect of income on population
reecting households optimization
Output per capita is stationary
reecting diminishing returns to labor in agriculture and a pos-itive e¤ect of income on population
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence ClubsSources of Technological Progress
Early stage of development
Population size positively a¤ects technological progress via:
Supply of innovations
Demand for innovations
Di¤usion of knowledge
Division of labor
Extent of trade
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence Clubs...Sources of Technological Progress
Later Stages of Development
Human capital positively a¤ects technological progress
Educated individuals have a comparative advantage inadopting and advancing new technologies
Population scale is still benecial, as long as it does not comeon the account of population quality
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
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The increase in the rate of technological progress increases thedemand for human capital
Human capital permits individuals to better cope with the changesin the technological environment
The introduction of new technologies is skill-biased in the short-run, although the nature of the technology is skill-biased or skill-saving in the long run
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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The rise in the demand for human capital in the second phase ofIndustrialization induces parents to substitute quality for quan-tity of children
The rise in income along with the rise in the potential returnto human capital generates:
An income e¤ect - more income to spend on children
Substitution e¤ects -
the opportunity cost of raising children increasesthe potential return to investment in childrens human capitalincreases
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
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Early part of the second phase of industrialization:
The income e¤ect dominates and population growth and humancapital formation increases:
The subsistence consumption constraint (that adversely a¤ectresources devoted to children) has a larger e¤ect at low levelsof income
The demand for human capital is moderate
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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Later part of the second phase of industrialization:
The substitution e¤ect dominates, population growth declinesand human capital formation increases further
The subsistence consumption constraint (that adversely a¤ectresources devoted to children) has a lower e¤ect at high levelsof income
The demand for human capital is more signicant
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence ClubsThe Malthusian Regime
The economy is a Malthusian steady-state equilibrium
Technological progresses is slow
The return to human capital is low, and parents have no incen-tive to substitute child quality for quantity
The temporary increase in income increases population propor-tionally
Output per capita uctuates initially around a stationary level,and then around an increasing, but minor trend.
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence ClubsThe Post-Malthusian Regime
Technological progress becomes more rapid due to the increasein the population size and quality and it permits the economyto take-o¤ from the Malthusian regime
The pace of technological progress increases
The demand gradually increases towards the end of the period
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence Clubs...The Post-Malthusian Regime
Technological progress and the rise in the demand for humancapital has two e¤ects on population growth:
Income E¤ect: More resources for raising childrenSubstitution E¤ect: Reallocation towards child quality
The income e¤ect dominates and both population quantity andquality increases
Output per capita increases along with an increase in the rateof population growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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Technological progress intensies further due to the gradualincrease in the level of human capital
The demand for human capital further increases
Parents are induced to further substitute child quality for quan-tity
The substitution e¤ect dominates and fertility rates decline per-manently
The economy converges to a steady-state where output percapita may grow at a positive rate and population growth ismoderate
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence ClubsThe Basic Structure of the Model
Overlapping-generations economy
t = 0; 1; 2; 3:::1
One homogeneous good
2 factors of production:
Labor (measured in e¢ ciency units)Land
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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The output produced in period t
Yt = Ht (AtX )1
Ht - e¢ ciency units of laborX - land
Output per worker produced at time t
yt = ht x(1)t y(ht ; xt)
ht Ht=Lt e¢ ciency units per-workerxt (AtX )=Lt e¤ective resources per worker
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Land is xed over time
E¢ ciency units of labor evolves endogenously
determined by householdsdecisions about the number andlevel of human capital of their children
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence ClubsIndividuals
Live for 2 period
Childhood: (1st Period):
Consume a fraction of their parental unit-time endowment.The required time increases with childrens quality
Parenthood (2nd Period):
Allocate time between childrearing and workChoose the optimal mixture of quantity and quality of childrenSupply their remaining e¢ ciency units of laborEarn the competitive market wageConsume.
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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The Utility function of individual t
ut = (ct)(1 )(ntht+1)
nt - number of children of individual t
ht+1 - level of human capital of each child
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Second period budget constraint:
wthtnt( + et+1) + ct wtht
+ et+1 time needed to raise a child with education et+1 time required to raise a child, regardless of quality
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Human capital of children of generation t
ht+1 = h(et+1; gt+1)
gt+1 (At+1 At)=At - rate of tech progress
et+1 - education
heg (et+1; g t+1) > 0
he (et+1; g t+1) > 0; hee (et+1; g t+1) < 0;hg (et+1; g t+1) < 0; hgg (et+1; g t+1) > 0
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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fnt ; et+1g = argmaxfw tht [1 nt( + et+1)]g1 f(nth(et+1; g t+1)g
Subject to:
wtht [1 nt( + et+1)] ~c
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Time Devoted toRaising Children
c~
γ
γ−1
SubsistenceConsumption
Income ExpansionPath
Consumption
Time Devoted toRaising Children
c~
γ
γ−1
SubsistenceConsumption
Income ExpansionPath
Consumption
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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g t 1+
)g(ee 1t1t ++ =
1+te
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Technological progress over time
gt+1 At+1 At
At= g(et ; Lt)
g(0; Lt) > 0
gi (et ; Lt) > 0 and gii (et ; Lt) < 0; i = e; L
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Lt+1 = ntLt
Lt+1=
8<:nb(gt+1)Lt if zt ~z
na(gt+1; z(et ;gt ; xt))Lt if zt ~z
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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gt+1 At+1 At
At= g(et ; Lt)
At+1 = (1+ gt+1)At = (1+ g(et ; Lt))At
xt+1 At+1XLt+1
=(1+ gt+1)AtX
ntLt=1+ gt+1nt
xt = (et ; gt ; xt ; Lt)xt
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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fxt ; et ; gt ; Ltg1t=08>><>>:xt+1 = a(et ; gt ; xt ; Lt)xtet+1 = e(g(et ; Lt))gt+1 = g(et ; Lt)Lt+1 = na(g(et ; Lt); z(et ;gt ; xt))Lt :
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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fgt ; et ; Lg1t=0 such that:
gt+1 = g(et ; L)
et+1 = e(gt+1)
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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te
g t )( 11 ++ = tt gee
);(1 Legg tt =+
(L)g l
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
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te
g t )( 11 ++ = tt gee
(L)g l
te
g t )( 11 ++ = tt gee
);(1 Legg tt =+
(L)g l
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Unied Growth TheoryThe Theory
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te
g t )( 11 ++ = tt gee
(L)g l
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Unied Growth TheoryThe Theory
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te
g t )( 11 ++ = tt gee
);(1 Legg tt =+
(L)g l
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Unied Growth TheoryThe Theory
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g t )g(ee 1t1t ++ =
)L;e(gg t1t =+
eu eh
gh
gu
(L)g l
te
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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g t )g(ee 1t1t ++ =)L;e(gg t1t =+
eh
gh
gu
te
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Small Population
te
txtt xx =+1
)(Lx l
EE
)(Le
Conditional MalthusianFrontier
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Intermediate Population
te
txtt xx =+1
)(Lx l
EE
EE EE
)(Leu )(Leh)(Le
Conditional MalthusianFrontier
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Large Population
te
tx tt xx =+1 EE
)(Le )(Leh
Conditional MalthusianFrontier
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence Clubs...Calibrations of Galor-Weil - (Lagerlof RED 2006)
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Unied Growth TheoryThe Theory
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UGT suggests that the transition from stagnation to growth isan inevitable by-product of the process of development
The inherent Malthusian interaction between technology andpopulation, accelerated the pace of technological progress, andeventually brought an industrial demand for human capital
Human capital formation, triggered a demographic transition,enabling economies to convert a larger share of the fruits offactor accumulation and technological progress into growth ofincome per capita
Variations in the timing of the take-o¤ from stagnation togrowth contributed signicantly to the Great Divergence
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Unied Growth TheoryThe Theory
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The Main ElementsThe Fundamental MechanismThe ModelThe Dynamical SystemCalibrationsTestable ImplicationsConvergence ClubsUGT and the Emergence of Convergence Clubs
Di¤erences in the timing of the take-o¤ from stagnation togrowth across countries contributed to the emergence of con-vergence clubs
Although the long-run equilibrium may not di¤er across economies,di¤erential timing of takeo¤s from stagnation to growth seg-mented economies into three fundamental regimes the di¤er intheir growth structure:
Slow growing economies in the vicinity of a Malthusian regime
Fast growing countries in a sustained growth regime
Economies in the transition from one regime to another
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Convergence clubs may be temporary and endogenous forceswould permit economies to shift from the Malthusian Regimeinto the sustained growth regime
In contrast to existing research that links memberships in eachclub and the thresholds that permit economies to switch acrossthese regimes to critical levels of income or human capital, UGTsuggests that they are in fact associated primarily with criti-cal changes in the rates of technological progress, populationgrowth and human capital formation
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UGT and Comparative Development
Variations in the economic performance across countries and regions(e.g., earlier industrialization in England than in China) reect ini-tial di¤erences in geographical factors and historical accidents andtheir manifestation in variations in institutional, demographic, andcultural factors, trade patterns, colonial status, and public policy
gt+1 = g(et ; L; )
= fculture, genetic diversity, institutions, trade, colonial history,...
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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...UGT and Comparative Development
Once a technologically-driven demand for human capital emerged inthe second phase of industrialization, the prevalence of human cap-ital promoting institutions (i.e. public education), and other factorsthat a¤ect the return to human capital, determined the extensive-ness of human capital formation, the timing of the demographictransition, and the pace of the transition from stagnation to growth
et+1 = e(gt+1; )
= finequality, capital markets, public policy, social structure, trade..
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Variation in Economic Development
te
g t
);,(1 Ω=+ Legg tt
te
g t);( 11 Ψ= ++ tt gee
)(Lg l Ω;
)g(Ψ
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Earlier Take-O¤
g t
);( 11 Ψ= ++ tt gee
);,(1 Ω=+ Legg tt
eh
gh
)(Ωg
te
)g(Ψ
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Superior Long-Run Equilibrium
g t);( 11 Ψ= ++ tt gee
);,(1 Ω=+ Legg tt
eh
gh
te
)(Ψg
)(Ωg
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Comparative Development: Geographic Determinism
Culture assimilation vs. cultural di¤usion
Fosters technological progress within a technological regime onthe account of the rapidity of the transitions across regimes
Concentration of land ownership
Delays the implementation of human capital promotinginstitutions
International trade
Di¤erential e¤ect on the demand for human capital
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
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Comparative Development: Genetic Determinism
Genetic diversity and comparative development
Optimal diversity within a technological regime
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Cultural Diversity and Comparative Development
Variation in cultural diversity across countries
Generates variation the timing of the transition fromMalthusian stagnation to sustained economic growth:
Divergence and Reversal of Fortunes
Domination of some societies in the Malthusian era
Domination of other societies in the transition to industry
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The Fundamental Hypothesis
Two forces operate on the degree of cultural diversity within asociety:
Cultural Assimilation
Homogenization of cultural traits within a society) fosters the accumulation of society-specic humancapital & enhance societys ability to e¢ ciently exploitthe existing technological frontier
Cultural Di¤usion
Di¤usion of new (foreign) cultural traits into the society) diminishes the accumulation of society-specichuman capital but enhances the creation of knowledgeand universal human capital & the adaptability of societytoward a looming industrial regime
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...The Fundamental Hypothesis
Within a given technological regime:
An uninterrupted accumulation of society-specic humancapital permits e¢ cient production with respect to thePPF and is benecial for economic prosperity
In the transition between technological regimes:
The accumulation of universal human capital (knowledge)increases the adaptability of society and facilitates earliertechnological transitions
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...The Fundamental Hypothesis
Societies that were geographically vulnerable to cultural di¤usion:
Lagged behind during the agricultural stage of development
Experienced an earlier transition to industrial society
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Cultural Diversity and Malthusian Development
Early stages of development
The adverse e¤ect of cultural diversity on the transmission ofsociety-specic human capital outweighs its benecial e¤ect on ruralproductivity (via the expansion of the knowledge frontier)
Cultural diversity is associated with an inferior Malthusianequilibrium: lower levels of rural productivity and working population
The long-run level of income per capita is una¤ected by the degreeof cultural diversity since lower level of rural productivity iscounter-balanced by a proportionately smaller population
) Societies that are less vulnerable to culturaldi¤usion will dominate in the Malthusian stage ofdevelopment
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Cultural Diversity and Industrialization
Later stages of development
The benecial e¤ect of moderate level of diversity on theadvancement of latent manufacturing productivity outweighs itsadverse e¤ect on the transmission of society-specic human capital
A higher diversity (at moderate levels) is associated with an earliertake-o¤ to industry
) Societies that are less vulnerable to culturaldi¤usion will overtake the more vulnerable ones.
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Cultural Composition and Overtaking
The growth rate of (the latent) manufacturing productivity is:
gt+1 = !(1 !) Lt 1
Consider two societies C and E - society E has a higher culturaldiversity in the interval (0; !]
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Evolution of the two Countries: Malthusian Regime
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UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Domination of the Culturally Homogenous Country
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Domination of the Culturally Homogenous Country
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Domination of the Culturally Homogenous Country
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Earlier Industrialization: Culturally Diverse Country
ESS
CSSLL
CAA|MtCAMM
RtA
tL
0
EAA
|MtEAMM
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Overtaking by the Culturally Diverse Economy
ESS
CSSLL
CAA
|MtCAMM
RtA
tL
0
EAA
|MtEAMM
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Later Industrialization: Culturally Homogeneous Country
ESS
LL
CAA
|MtCAMM
RtA
tL
0
EAA
|MtEAMM
CSS
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Genetic Diversity and Comparative Development
Variation in genetic diversity across countries
Generates variation the timing of the transition fromMalthusian stagnation to sustained economic growth:
Divergence and Reversal of Fortunes
Domination of some societies in the Malthusian era
Domination of other societies in the transition to industry
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
The Fundamental Hypothesis
Trade-o¤ associated with genetic diversity:
Low Diversity: fosters the accumulation of society-specic humancapital & enhance societys ability to e¢ ciently exploit the existingtechnological frontier
Higher Diverse: enhances the creation of knowledge and universalhuman capital & the adaptability of society toward a loomingindustrial regime
=) Hump-shaped relationship between geneticdiversity and economic outcomes:
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
...The Fundamental Hypothesis
Within a given technological regime:
An uninterrupted accumulation of society-specic humancapital permits e¢ cient production with respect to thePPF and is benecial for economic prosperity
In the transition between technological regimes:
The accumulation of universal human capital (knowledge)increases the adaptability of society and facilitates earliertechnological transitions
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
...The Fundamental Hypothesis
Societies whose migratory distance from east Africa was small andthus it genetic diversity large (the Serial-Founder e¤ect):
Lagged behind during the agricultural stage of development
Experienced an earlier transition to industrial society
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Genetic Diversity and Migratory Distance from East Africa
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Predicted Genetic Diversity and Population Density in1500 CE
Predicted Diversity and Economic Development in 1500 CE
(1) (2) (3) (4) (5) (6)Dependent Variable is Log Population Density in 1500 CE
Pred. Diversity 250.99*** 213.54*** 203.02*** 195.42*** 199.73**(68.26) (63.50) (61.05) (56.09) (80.51)
Pred. Diversity Sqr. -177.40*** -152.11*** -141.98*** -137.98*** -146.17***(50.22) (46.65) (44.83) (40.84) (56.26)
Log Transition Timing 1.29*** 1.05*** 1.16*** 1.24***(0.18) (0.19) (0.15) (0.24)
Log Arable % of Land 0.52*** 0.40*** 0.39***(0.12) (0.09) (0.10)
Log Absolute Latitude -0.17* -0.34*** -0.42***(0.09) (0.09) (0.12)
Log Agri. Suitability 0.19 0.31*** 0.26***(0.12) (0.10) (0.10)
Continent Dummies No No No No No YesObservations 145 145 145 145 145 145R-squared 0.22 0.26 0.38 0.50 0.67 0.69
Notes: Bootstrap standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Genetic Diversity and Population Density in 1500 CE
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Genetic Diversity and Income Per Capita in 2000
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
International Trade and the Pace of the Transtion fromStagnation ot Growth
International trade in the early stages of industrialization had anasymmetric e¤ect on:
the demand for human capital in industrial and non-industrialeconomies
timing of the demographic transition in industrial andnon-industrial economies
the pace of the transition from Malthusian stagnation tosustained economic growth
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
The Main Hypothesis
International trade had an asymmetric e¤ect on DCs and LDCS:
Specialization
DCs - in the production of skilled intensivegoodsLDCs - in the production of unskilled intensivegoods
Demand for human capital
DCs - a rise the demand for human capitalLDCs - a decline in the demand for humancapital
Demographic Transition
DCs - acceleration of the DTLDCs - delay in the DT
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
...The Main Hypothesis
Gains from Trade
DCs - channeled towards income per capitaLDCs - channeled towards population growth) sustained di¤erences in income per capitaacross countries
Dynamics comparative advantage
DCs - an increase in the abundance in skilledlaborLDCs - an increase in the abundance in unskilledlabor
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
The Di¤erential E¤ect of Trade on Fertility
Dependent Variable:Total Fertility Rate (1985-1990)
Non-OECD OECD
OLS IV OLS IV(1) (2) (3) (6)
Explanatory Variables:
ln(Trade/GDP) 1985 0:33 0:70 0:04 0:13(0:14) (0:19) (0:09) (0:06)
ln(GDP/pc) 1985 0:39 0:44 0:14 0:10(0:27) (0:25) (0:23) (0:23)
Average Infant Mortality 0:03 0:03 0:03 0:03
1985-90 (0:005) (0:005) (0:005) (0:006)
Number of countries 108 108 24 24
R2 0:72 0:71 0:62 0:60
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
The E¤ect of Trade on Total Fertility Rate - Non-OECD
AGOARG BHS
BHR
BGDBRB
BLZ
BEN
BTNBOL
BWA
BRA BGR
BFA BDICMR
CPV
CAFTCDCHL
CHN
COL
COM
COG
CRI
CIV
CYP
CZE
COD DJI
DOMEGY SLVETH FJI GMB
GHAGTM
GINGNB
GUY
HTI
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ISR
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MYS
MLI
MLTMRT
MUS
MEXMNG
MARMOZ
MMR
NAM
NPL
NIC
NER
OMN
PAK
PANPNG
PRY
PER
PHL
POLPRI
KOR ROMRUS
RWA
LCA
VCT
WSMSEN
SLE
SGP
SLB
SOMZAF
LKA
SDN
SUR
SWZ
SYR
THA
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TON
TTOTUN
UGA
TZA
URY
VUT
YEM
ZMB
ZWE
42
02
45
Tota
l Fer
tility
Rat
e 19
859
0
1.5 1 .5 0 .5 1 1.5Log Trade Share in GDP 1985
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
The Transition from Stagnation to Growth
AUS
AUT
BEL
CAN
DNK
FIN
FRA
DEU
GRC
ISL
IRL
ITA
JPN
LUX
NLD
NZL
NOR
PRTESP
SWE
CHE
TURGBR
USA
.8.4
0.4
.8To
tal F
ertili
ty R
ate
1985
90
1 .5 0 .5 1 1.5 2Log Trade Share in GDP 1985
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
The E¤ect of Trade on Education
Dependent Variable:Changes in Education (1985-1990)Non-OECD OECD
OLS IV OLS IV(1) (2) (3) (6)
Explanatory Variables:
ln(Trade/GDP) 1985 0:10 0:27 0:26 0:35
(0:08) (0:12) (0:19) (0:20)
ln(GDP/pc) 1985 0:15 0:20 0:26 0:25(0:06) (0:07) (0:25) (0:22)
Number of countries 74 74 23 23
R2 0:05 0:01 0:08 0:08
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
The E¤ect of Trade on Education - Non-OECD
ARG
BHR
BGDBRB
BEN
BOL
BWA
BRA CMR
CAF
CHL
CHN
COL COGCRI
CYP
COD DOM
EGY SLV
FJI
GMB
GHAGTM GNBGUYHTIHND
HKG
HUN
IND
ISR
JAM
JOR
KEN
LSOLBRMWI
MYS
MLIMUS
MEX
MOZMMRNPL
NICNER
PAK
PAN
PNG
PRY
PER
PHLPOL
KOR
RWA
SEN
SLE
SGP
ZAFLKA
SDN
SWZ
SYRTHA TGO
TTO
TUN
UGA
TZAURY
YEM
ZMB
ZWE1
.51
.50
.51
1.5
Educ
atio
n Fl
ow 1
985
1990
1.5 1 .50 .5 1 1.5Log Trade Share in GDP 1985
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
The E¤ect of Trade on Education - OECD
AUSAUT BELCAN
DNK
FIN
FRADEU
GRCISL
IRL
ITAJPN NLD
NZL
NOR
PRT
ESP
SWE CHETURGBRUSA
2.5
21
.51
.50
.51
1.5
22.
5Ed
ucat
ion F
low 1
985
1990
1.25 1 .5 0 .5 .75Log Trade Share in GDP 1985
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Concentration of Land Ownership and the Pace of theTranstion from Stagnation ot Growth
In the 2nd phase of industrialization the demand for humancapital increased as a by-product of the acceleration intechnological progress and generated a growth promoting rolefor:
Human capital formation
Human capital promoting institutions
Investment in human capital was sub-optimal
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Concentration of Land Ownership and the Pace of theTranstion from Stagnation ot Growth
Lower complementarity between human capital and land vs.physical capital generated a conicts between landowners andcapitalists about the level of investment in public schooling
Unequal distribution of land was a hurdle for human capitalaccumulation and economic growth:
Delayed education reforms
Reduced the skill-intensity of the emerging industrial sector
Adversely a¤ected the growth path in the industrial stage
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Concentration of Land Ownership and EducationExpenditure: US 1900-1940
Dependent Variable: Change inlog educational expend per childOLS IV(1) (2)
change in land concentration -2.34*** -3.23***(0.80) (0.91)
change in income per capita 0.72*** 0.72***(0.17) (0.17)
change in % of the black pop. -2.90*** -2.58***(0.96) (0.92)
change in % of the urban pop. -0.66* -0.51(0.40) (0.37)
National time xed e¤ects Yes YesR2 0.48First stage F-statistic 13.49First stage p-value <0.001Sargan test p-value 0.27
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Concentration of Land Ownership and EducationExpenditure: US 1900-1940
.50
.51
1.5
2C
hang
e in
Log
Rea
l Exp
end
per C
hild
.2 .1 0 .1Lagged Change in Land Share of Largest Farms
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory
IntroductionHistorical Evidence
Unied Growth TheoryThe Theory
UGT and Comparative Development
Cultural DiversityGenetic DiversityInternational TradeConcentration of Land OwnershipConcluding Remarks
Concluding Remarks
Unied growth theory provides a meta-theory that naturallyencompasses existing hypothesis about the role of geography,institutions, and the composition of human traits, in comparativedevelopment and permits that examination of variations theeconomic performance across countries and regions based onvariations initial geographic factors and their manifestation invariations in culture, genetic diversity, scientic structure, andeducational, institutional, geographical factors on the pace of thetransition from stagnation to growth.
Oded Galor Comparative Economic Development: Insights from Unied Growth Theory