2018SpringUN3213Lecture11Malthus.pdf

2018SpringUN3213Lecture11Malthus.pdf - EconomicsUN3213...

Info icon This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Intermediate Macroeconomics Economics UN3213 Professor: Jón Steinsson Lecture 11 1 Announcements • Problem Set 3 has been posted • Sample midterm has been posted • Readings for today and Thursday: – Steinsson (2017), Steinsson (2018) 2 The Malthus Model • Labor Demand: ௔ ௧ ௧ ௧ • Labor Supply: ௧ାଵ ௧ ௦ ௧ ௧ • Combining two equations: ௧ାଵ • where ଵି௔ ௧ ௧ ௧ ௔ ௦ ௔ 3 The Malthus Model Graphical analysis consists of four key plots: 1. Population dynamics plot ( ௧ାଵ against ௧ ) ௧ାଵ 2. Labor demand plot ( ௧ ଵି௔ ௧ ௧ ௧ ௧ against ௧ ௧) ௔ ௧ 3. Time‐series plot of population ( ௧ against ) 4. Time‐series plot of wages ( ௧ against ) 4 Responses to Shocks • What happens to population and wages in the short run and long run after these shocks: – Black Death ( ௧ )? – Increase in technology ( ௧ ௧ିଵ )? 5 Black Death 6 Black Death 7 Increase in Productivity 8 Increase in Productivity 9 Responses to Shocks • What happens to population and wages in the short run and long run after these shocks: )? • Black Death ( ௧ – Population falls in the short run but returns to same steady state. – Wages rise in the short run but then fall to same steady state • Increase in technology ( ௧ ௧ିଵ )? – Population begins to grow and grows to new steady state – Wages rise in the short run but then fall to same steady state 10 Steady State Population ௧ାଵ ଵି௔ ௧ ௧ ௧ • A steady state for ௧ is a value for ௧ at which ௧ାଵ ௧ , i.e., the population is “steady” • Population will reach such a point after long period of no “shocks” (e.g., ௧ and ௧ ) • We denote steady state for ௧ by • We can solve for the steady state analytically 11 Solving for Steady State 1. Suppose there is a steady state . Then . So, replace ௧ାଵ and ௧ with ௧ାଵ ௧ in population dynamics equation. Also, set ): shocks to normal values (i.e., ௧ ௧ 2. Solve for : ଵି௔ ଵ ௧ ௔ 12 Growth in England 1250‐1860 • Can we use the Malthus model to make sense of the evolution of real wages in England from 1250 onward? • Two striking facts: – No growth (same in 1750 as in 1250) – Big rise (1300‐1450) and then fall (1450 to 1640) 13 Real Wages of Laborers in England from 1250 to 2000 960 480 240 120 60 30 1250 1350 1450 1550 1650 1750 Source: Clark (2005) 1850 1950 14 Growth in England 1250‐1850 • Malthus model suggests that evolution of the population may help us understand changes in real wages • Let’s look at a scatter plot of real wages and the population in England over time 15 Real Wages of Laborers in England 1250‐1450 Real Wage 100 1450 90 80 1400 70 60 1250 50 1350 1300 40 30 20 0 1 Source: Clark (2010) 2 3 4 5 Population (millions) 6 7 8 16 Real Wages of Laborers in England 1250‐1640 Source: Clark (2010) 17 Real Wages of Laborers in England 1250‐1640 • 1250‐1310: – Population rises and real wages fall • 1310‐1450: – Population falls and real wages rise – Black Death in 1340s. Waves of plagues afterwards • 1450‐1640: – Population rises and real wages fall – Economy “recovers” from plagues 18 Success of Malthus Model • Big rise and fall of real wages may have seemed puzzling before • Malthus model provides an explanation: – Real wages rose as plagues halved the population – Real wages fell as population recovered 19 Why Did Recovery Take So Long? • There were many plagues after 1350 • Black Death may have caused a decrease in birth rates • European Marriage Pattern: – Women married at 25 as opposed to 20 – Significant fraction never married • Voigtlander and Voth (2013): – Black Death lead to shift to pastoral farming – Women have comparative advantage at pastoral farming 20 Technical Change in England 1250‐1640 • 1250‐1640: – Real wages and population moved up and down a stable labor demand curve ௧ ௦ ௧ ௔ ௧ • What does this imply about changes in productivity in England from 1250 to 1640? – There was essentially no change in productivity ). No technical change. (Why?) ( ௧ – Increases in ௧ shift the labor demand curve out 21 Real Wages of Laborers in England 1300‐1640 Real Wage 100 1450 90 80 70 60 1600 50 1640 1300 40 30 20 0 1 Source: Clark (2010) 2 3 4 5 Population (millions) 6 7 8 22 Something Changed Around 1650 Real Wage 100 1450 90 80 70 1780 60 1600 50 1650 1300 40 30 20 0 1 Source: Clark (2009) 2 3 4 Population (millions) 5 6 7 8 23 Something Changed Around 1650 • Points move off the curve!! • What does this mean about productivity? – Productivity started increasing ( ௧ started growing) • From 1640‐1730: Mostly increase in wages – Great Plague of London in 1665‐6 • From 1730‐1800: Mostly increase in population – Recovery from plagues? Increase in health? Engel‘s pause? • Around 1800: Huge acceleration 24 Real Wages of Laborers in England 1290‐1860 Real Wages 90.0 1860 80.0 1450 70.0 60.0 1730 50.0 1650 40.0 1800 1300 30.0 20.0 0 2 4 6 8 10 12 Population (millions) 14 16 18 20 25 Malthus’ Unfortunate Timing • Malthus sometimes get a bad rap – Prediction that wages were doomed to stay at subsistence turned out to be wrong after his writing – But his theory was arguably correct for all of history up until his writing!! • What changed after 1800? 26 Why Is World No Longer Malthusian? 1. Technological growth overwhelmed Malthusian forces – Population forces Malthus emphasized are slow – Fast enough technology growth my overwhelm them 2. Land less important in production – Existence of a fix factor of production (land) important for logic of Malthus model – Land became much less important after 1800 due to invention of the steam engine – Land no longer needed to produce energy 27 Why is World No Long Malthusian? 3. Demographic Transition – Data on birth rates and death rates support Malthus’ model quite well up until 1825 – After 1825, relationship between birth rates and real wages assumed by Malthus breaks down (and particularly after 1880) 28 Demographic Transition in England 29 Demographic Transition in England 30 Demographic Transition • High wages no longer associated with high population growth in England • Same pattern observed for all countries when they develop • Why did birth rates fall? – Improved contraceptive methods – Trade‐off between quantity and “quality” of children? – Women’s empowerment 31 Real Wages of Laborers in England 1290‐1860 Real Wages 90.0 1860 80.0 1450 70.0 60.0 1730 50.0 1650 40.0 1800 1300 30.0 20.0 0 2 4 6 8 10 12 Population (millions) 14 16 18 20 32 Why Did Industrial Revolution Happen? • Not a settled issue! • Several theories: – Institutional changes (North‐Weingast, 1989; Acemoglu‐Johnson‐Robinson, 2005) – Enlightenment (Mokyr, 2009) – Agricultural Revolution – High wages and cheap coal (Allen, 2009) • Almost surely some combination of all of these theories (and others) 33 INSTITUTIONS 34 What Happened in the 1640s? Real Wages 90.0 1860 80.0 1450 70.0 60.0 1730 50.0 1650 40.0 1800 1300 30.0 20.0 0 2 4 6 8 10 12 Population (millions) 14 16 18 20 35 England in the 17th Century • Two revolutions: 1640s and 1688 • Civil War in 1640’s: – Parliamentarians overthrow Charles I and set up Commonwealth – Great deal of institutional change • Growth despite much turmoil!! • “Glorious” Revolution of 1688: – Formalization of constitutional monarchy in England • Marxist historians stress revolution of 1640s, while Whig history stresses Glorious Revolution of 1688 36 ...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern