PI(s): Wilde, Joshua
Affiliation(s): Brown University
Institutional Partner(s): IIE Fellow
Funding Partner: IIE
Data Source(s): Panel Data
Methods: Instrumental Variable Regression Approach
Geographic Location(s): England
The extent to which fixed factors of production such as land, constrain per capita income growth has historically been a widely discussed topic in economics since the Malthusian theory. Whether fixed factors limit growth critically depends on two variables: (1) the substitutability of fixed factors in production; (2) the extent to which innovation will be biased toward land-saving technologies. This study attempts to quantify both by using the timing of plague epidemics as an instrument for labor supply, and estimates the elasticity of substitution between fixed and nonfixed factors in preindustrial England. Using data on rent in preindustrial England on population, the researcher analyzes the elasticity of these factors. Results show that elasticity of substitution between land and other factors during this period was significantly less than one, which implies that the Malthusian effects of population on income are stronger than current models predict. In addition, the study estimates the direction and magnitude of induced innovation and finds evidence that denser populations, which also have less availability of land, induce innovation toward land-saving technologies. Specifically, the results show a doubling of population density in England. The implication is that policies that reduce population growth have the potential to increase income per capita more than is believed.
Wilde, Joshua. (2012). How substitutable are fixed factors in production? Evidence from pre-industrial England. (Working Paper)
Wilde, Joshua. (2011). Essays in Population, Natural Resources, and Economic Growth (Doctoral Dissertation). Brown University, Providence, RI.