Essays on Productivity Change, Growth, and Development

Essay 1: To replicate an industrial revolution: from exogenous to endogenous growth In the last quarter of the second millennium many countries experienced, simultaneously, an industrial revolution (an exponential increase in the income per capita) and a demographic transition (an increase first and a decrease later of the population growth rate). How do we account for these facts? Following Lucas (2002b), I construct an overlapping generations model “from stagnation to growth”, calibrate it, simulate the transition, and compare it with data for England between 1640 and 2000. The model can account fairly well for the joint movement of income per capita and population growth rates, as well as other dimensions of the data. The results emphasize the relevance of the costs of investment in human capital (costs of education), and suggest that the process of development can be understood as the passage from exogenous to endogenous growth. In this setting, the main anomaly is that the model generates higher income per capita growth rate during the 18 century than the one observed in the data. Essay 2: Social ties and economic development (with Fernando Anjos) This paper develops a general equilibrium model where the set of goods includes ties between economic agents (e.g., friendships or acquaintances). We refer broadly to these as social ties. A tie between any two agents is produced according to a technology that uses time from both parties. The model also assumes that social ties contribute toward social capital, which economizes on transaction costs between members of the same community. Our theoretical approach yields the existence of multiple equilibria, which can be interpreted as rational outcomes in societies with different cultural beliefs, in the sense of Greif (1994). We calibrate this model to data on social ties and income per capita for a cross section of 27 countries. Our main quantitative findings are the following: (i) heterogeneity in the average number of social ties can account for a significant portion of the heterogeneity in income per capita across countries; (ii) the model can account for between 1/5 and 1/2 of the changes in use of time in the United States between 1900 and 2000; (iii) according to one measure, the calibrated model implies that without social capital countries would be between 1/2 and 3/4 their actual size in terms of income per capita. Theoretically we have the following additional results: (i) a preference for social ties may significantly mitigate an other-