experimental tests of core theory and the coase theorem inefficiency and cycling abstract we examine experimentally the bargaining process and the final allocation of payoffs in games that differ in terms of whether the core exists and in the initial allocation of property rights among the players this paper highlights the interaction among property rights transaction costs and the empty core our experimental results indicate that the existence of the core is an important determinant of bargaining generally and the coase theorem in particular they confirm our conjecture that when the core is empty and property rights are ill defined coasean efficiency breaks down among other results our experiments show that the number of inefficient non pareto optimal agreements and bargaining rounds with cycling are significantly greater when the core is empty than when the core exists especially when property rights are ill defined our results suggest an economic role for specific property right arrangements to resolve the empty core

from malthusian stagnation to modern growth this paper investigates the historical evolution of the relationship among population growth technological change and standard of living the analysis focuses on two most important differences among the malthusian regime post malthusian regime and modern growth regime these were the behavior of income per capita and the relationship between the level of income per capita and the population growth rate the modern growth regime is characterized by steady growth in both income per capita and the level of technology in the malthusian regime technological progress and population growth was glacial by modern standards and income per capita was fairly constant in contrast to the modern growth regime the relationship between per capita income and population growth in the malthusian regime was positive post malthusian regime shared one characteristic with each of the two regimes in addition this paper developed and described an endogenous growth model consistent with the above mentioned transition process

a model of u k emigration 1870 1913 this paper develops a simple time series model of emigration and applies it to data for emigration from the united kingdom 1870 1913 the model is derived from a macroeconomic analysis of the migration decision and provides a specific functional form and dynamic structure it encompasses and explains many of the empirical findings of earlier research on the determinants of emigration over this historical period the results support the model strongly in most respects both wage rates and employment rates in the sending and in the receiving countries influenced fluctuations in emigration the short run fluctuations were driven largely by variations in employment rates while the long run level of emigration was determined largely by the relative wage

toward a positive economic theory of antitrust most economists associate antitrust policy with the sherman and clayton acts nonetheless there is in england and america a much older body of antitrust law namely the common law of restraint of trade this regulation like language and markets evolved over a long period of time this article examines whether the rules that the common law courts developed can be explained by a hypothetical wish to maximize social wealth and concludes that many of them can be the last part of the article outlines a theory of legal evolution

malthus revisited fertility decision making based on quasi linear preferences abstract malthus 1798 population hypothesis is inconsistent with the demographic transitions and the massive income expansion observed among industrialised countries the current study shows that eliminating the income effect on the demand for children from malthus theory makes consistent with industrial development

lessons from the united states s antitrust history abstract the united states s antitrust policy spans more than 100 years for most of its history the united states has had the toughest antitrust laws and enforcement policies of any country in the world a shift to a more permissive attitude with regard to antitrust matters has occurred in recent years however this paper traces the changes in antitrust policy that have occurred and the concurrent shifts in thinking among economists on antitrust questions following this review the paper offers a critical appraisal of both the economic underpinning of the new learnings on antitrust matters and the changes in antitrust policy that have accompanied them it closes with a discussion of the implications of the analysis for european antitrust competition policy

theories of cartel stability and the joint executive committee this article reexamines the experience of the joint executive committee an 1880s railroad cartel to assess the applicability of the green and porter 1984 and rotemberg and saloner 1986 theories of price wars after discussing necessary modifications to the theories i estimate a number of dynamic models to explore the causes of price wars the cyclical nature of pricing and the possibility that secret price cuts may have been given the estimates provide some support for the predictions of the first theory

macroeconomic forecasting and structural change the aim of this paper is to assess whether explicitly modeling structural change increases the accuracy of macroeconomic forecasts we produce real time out of sample forecasts for inflation the unemployment rate and the interest rate using a time varying coefficients var with stochastic volatility tv var for the us the model generates accurate predictions for the three variables in particular for inflation the tv var outperforms in terms of mean square forecast error all the competing models fixed coefficients vars time varying ars and the na ove random walk model these results are also shown to hold over the period commonly referred to as the great moderation

short term gdp forecasting with a mixed frequency dynamic factor model with stochastic volatility in this article we develop a mixed frequency dynamic factor model in which the disturbances of both the latent common factor and of the idiosyncratic components have time varying stochastic volatilities we use the model to investigate business cycle dynamics in the euro area and present three sets of empirical results first we evaluate the impact of macroeconomic releases on point and density forecast accuracy and on the width of forecast intervals second we show how our setup allows to make a probabilistic assessment of the contribution of releases to forecast revisions third we examine point and density out of sample forecast accuracy we find that introducing stochastic volatility in the model contributes to an improvement in both point and density forecast accuracy supplementary materials for this article are available online

the usefulness of core theory in economics economic problems it has an undeserved reputation of being too abstract owing mainly to the manner in which it is employed in the theory of general equilibrium in fact core theory is a highly flexible way of looking at practical economic problems especially problems in industrial orga nization this paper seeks to show how simple numerical examples can illus trate the idea of the core and in turn how the core can illustrate basic principles of economics

measuring the impact of fiscal policy in the face of anticipation a structural var approach empirical estimates of the impact of government spending shocks disagree on central issues such as the size of output multipliers and the responses of consumption and the real wage one explanation for the disagreement is that fiscal shocks are often anticipated due to misspecification of the information set anticipation effects may invalidate svar estimates of impulse responses we use economic theory to derive a fiscal svar estimator that is applicable when fiscal shocks are anticipated we study its properties and apply it to us data we fail to find evidence that anticipation effects overturn the existing findings from the fiscal svar literature despite years of intensive research the empirical literature on fiscal policy has yet to reach consensus on the macroeconomic impact of fiscal policy shocks disagreements concern central issues such as the size of output multipliers and the impact of government spending shocks on consumption and the real wage clearly such level of disagreement constrains our ability to give simple guidelines for the operation of one of the most important stabilisation policies a key empirical obstacle is the measurement of innovations to fiscal policy one strand of the literature employs structural vector autoregressive svar methods and achieves identification based on the presence of decision lags or sign restrictions

antitrust and competition historically considered although antitrust laws enjoy wide support among economists there was almost no such support during the early years of the sherman act one reason for this transformation is a change in the theory of competition until the 1920s most economists viewed competition as a dynamic rivalrous process that would be stifled by antitrust laws once the perfect competition model which largely ignores rivalry was accepted economists opinions of antitrust grew more favorable to the extent that antitrust interferes with rivalry and enterprise the competitive model has very likely misdirected the profession at least as far as antitrust policy is concerned

physician price fixing under the sherman act an indirect test of the maricopa issues the expression price fixing usually indicates an attempt by competitors to put a floor under the minimum price they will charge but a recent decision of the supreme court arizona v maricopa county suggests that attempts to fix maximum prices are equally economically objectionable in this paper i propose an explanation of simultaneous minimum and maximum price fixing i also investigate empirically the distribution of physicians fees in a closely related instance of alleged physician price fixing the data reject any inference of successful price fixing and instead conform to the usual predictions of the economics of costly market information

business cycle measurement with some theory a method to evaluate cyclical models not requiring knowledge of the dgp and the exact specification of the aggregate decision rules is proposed we derive robust restrictions in a class of models use some to identify structural shocks in the data and others to evaluate the class or contrast sub models the approach has good properties even in small samples and when the class of models is misspecified the method is used to sort out the relevance of a certain friction the presence of rule of thumb consumers in a standard class of models

short term monitoring of fiscal policy discipline under the maastricht treaty and the stability and growth pact sgp european union eu member states commit themselves to avoid excessive deficits over 3 of gdp and to pursue the medium term objective of budgetary positions close to balance or in surplus the sgp also provides regulation for the surveillance of budgetary positions an analysis of tools for the surveillance of budgetary positions is the focus of this paper in particular it addresses two open issues in the empirical public finance literature which are crucial for monitoring fiscal policy discipline in the eu first the estimation of the structural component of the fiscal balance ratio second the computation when only annual fiscal data are available of quarterly budget balance ratios using relevant information from quarterly measured macroeconomic series an econometric model that addresses both issues is presented and estimated additionally this modelling framework allows us to answer questions such as what is the safety margin that will prevent a particular country from reaching with certain probability a budget deficit that breaches the 3 upper bound copyright 2004 john wiley sons ltd

a new coincident index of business cycles based on monthly and quarterly series maximum likelihood factor analysis of time series is possible even when some series are quarterly and others are monthly treating quarterly series as monthly series with missing observations and replacing them with artificial observations independent of the model parameters one can apply the kalman filter to a state space representation of a factor model and evaluate the likelihood function an application to quarterly real gdp and monthly coincident business cycle indicators gives a new coincident index of business cycles the new index is essentially the smoothed estimate of latent monthly real gdp and should improve upon the stock watson index

the coase theorem and the empty core a comment i would not presume to discuss the value of the theory of the core for economic analysis what i will do is to explain why study of the example which professors aivazian and callen use as the basis of their argument has not led me to modify my views the imagined situation which aivazian and callen analyse is one in which there is a laundry c and two firms a and b which pollute profits would be in total greater if the two polluters a and b closed down it is argued that in the conditions set out in their example c could not induce a and b to cease operations by means of money payments ifa and b were not liable for the harm inflicted on c it is assumed that if each firm operated independently firm a would earn profits of 3 000 per unit of time b 8 000 and c 24 000 however if a pair of these firms made an agreement to change their mode of operation the joint profits would be for a and b 15 000 for a and c 31 000 and for b and c 36 000 since the firm excluded from these agreements would continue to operate independently it is apparent by adding the profit earned by this firm to the joint profit of the two firms in the agreement that the combined profits of all three firms would always remain 39 000 however if a and b could be induced to close down so that c alone continued to operate c s profits would be 40 000 as total profits with two firms party to an agreement and one firm acting independently are always 39 000 and total profits would be 40 000 if c alone operated it would seem possible for c to make payments to a and b out of the additional 1 000 that would accrue which would make a and b better off than if they continued in operation and would still leave something over to increase c s profits aivazian and callen argue however that this would not happen they maintain given the conditions postulated in their example that even if an arrangement was made between a b and c which enabled profits of 40 000 to be earned that position would be unstable

collusion in ocean shipping a test of monopoly and empty core models in markets with avoidable fixed costs the core may be empty i argue that a reason for collusion is to impose an equilibrium where none exists i set up a framework for deriving testable implications from the model and compare those implications with those of a cartel model i compare the two models empirically with data from liner shipping conferences legal collusive agreements that have been in force for over a century and i conclude that the evidence supports the theory of the core

illegal immigration border enforcement and relative wages evidence from apprehensions at the u s mexico border we examine illegal immigration in the united states from mexico over the period 1976 1995 one challenge is that we do not observe the number of individuals that attempt to enter the united states illegally we only observe the number of individuals apprehended attempting to cross the u s mexico border illegally based on a simple migration model we postulate the existence of an apprehensions function which expresses apprehensions at the border as a function of illegal attempts to cross the border and u s border enforcement effort we find that a 10 decrease in the mexican real wage leads to a 7 5 to 8 8 increase in apprehensions at the border excerpt

malthus was right explaining a millennium of stagnation abstract we develop a simple malthusian growth model with continuous productivity growth and derive the stationary steady state equilibrium we show that linearisation around the steady state gives an empirically tractable model of malthusian wage and population behaviour using the familiar concept of convergence our empirical strategy addresses the concern in the literature over model identification and inconsistent parameter estimates based on newly constructed population data we estimate wage and population growth models using panel data for up to 17 countries from 900ce to 1870ce our results provide the first time series evidence of a strong malthusian trap that was pervasive across countries and time before the 19th century industrial revolution

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

the genesis of the trusts rationalization in empty core markets motivated by a desire to understand the origin of the great consolidation movement at the turn of the last century this paper examines the unique history of the american trusts and proposes a new interpretation of the motives and consequences of these consolidations it is hypothesized that the same demand and supply conditions that made multiplant organization more efficient in these industries also made it impossible to obtain in a competitive environment the theory of the core as applied to small numbers situations is used to show why competition had to be restricted before efficient industry configurations could be achieved and supportive historical data are presented

sunk costs and cartel formation theory and application to the dyestuff industry we first develop a simple model of entry showing that cartels are more likely to emerge during periods of downturns and in industries with significant sunk costs cartel formation is also accompanied by a decline in profits we then use the framework to investigate the emergence of the swiss dyestuff export cartel during the inter war period and find empirical evidence that supports the main predictions of the model the analysis indicates that sunk costs and entry may be important determinants of cartel formation and are complementary to the traditional cartel stability conditions

from malthus to modern growth can epidemics explain the three regimes we model demographic and economic long run development in a setting where mortality is endogenous and subject to epidemic shocks the model replicates the full transition from malthusian stagnation to modern growth consistent with the historical facts the economy also passes an intermediate post malthusian phase where growth rates of both population and per capita income increase simultaneously as mortality rates fall and become less volatile the escape from the malthusian trap is the result of a series of mild epidemic shocks making it inevitable at some stage but its timing random calibrations show that it can differ by thousands of generations absent differences in exogenous parameters

optimal cartel equilibria with imperfect monitoring abstract there exist optimal symmetric equilibria in the green porter model 4 8 having an elementary intertemporal structure such an equilibrium is described entirely by two subsets of price space and two quantities the only production levels used by firms in any contingency the central technique employed in the analysis is the reduction of the repeated game to a family of static games

what are the effects of fiscal policy shocks we propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions specifically we use sign restrictions to identify a government revenue shock as well as a government spending shock while controlling for a generic business cycle shock and a monetary policy shock we explicitly allow for the possibility of announcement effects i e that a current fiscal policy shock changes fiscal policy variables in the future but not at present we construct the impulse responses to three linear combinations of these fiscal shocks corresponding to the three scenarios of deficit spending deficit financed tax cuts and a balanced budget spending expansion we apply the method to us quarterly data from 1955 to 2000 we find that deficit financed tax cuts work best among these three scenarios to improve gdp with a maximal present value multiplier of five dollars of total additional gdp per each dollar of the total cut in government revenue 5 years after the shock copyright 2009 john wiley sons ltd

passenger shipping cartels and their effect on trans atlantic migration abstract we investigate the impact of passenger shipping cartels on trans atlantic migration during the early twentieth century we assemble from primary sources a detailed database of passenger flows and cartel operations and show that cartel operation reduced migratory flows by approximately 20 to 25 further we show that there was no strong intertemporal substitution in migration to north america at least in the short run and therefore that the effects of cartel operation were not undone by later migration lastly we find that cartel operation had no appreciable effect on the variability of migration flows providing evidence against the notion that unfettered competition was destabilizing to turn of the century transportation markets

dynamics and stagnation in the malthusian epoch this paper examines the central hypothesis of the influential malthusian theory according to which improvements in the technological environment during the pre industrial era had generated only temporary gains in income per capita eventually leading to a larger but not significantly richer population exploiting exogenous sources of cross country variations in land productivity and the level of technological advancement the analysis demonstrates that in accordance with the theory technological superiority and higher land productivity had significant positive effects on population density but insignificant effects on the standard of living during the time period 1 1500 ce

an application of core theory to the analysis of ocean shipping markets he theory of the core implies that competition is frequently unstable and inefficient under some fairly common cost and demand conditions in particular when costs are characterized by indivisibilities for example avoidable costs and demand is finely divisible the core may be empty in other words a competitive equilibrium frequently fails to exist and as a consequence competitive interactions between firms cannot generate an efficient allocation of resources there are various means of addressing the empty core problem collusion between producers for example can limit competition efficiently thus cartelization may be an efficient response to the cost and demand conditions that preclude the existence of a competitive equilibrium in this article i test the ability of the theory to explain the organization of ocean shipping markets an examination of these markets reveals that the theory works well firms in liner shipping markets where costs are indivisible while demand is finely divisible have colluded consistently since the industry s birth in the mid nineteenth century conversely bulk shipping markets where demand is indivisible and hence empty core problems are not a serious concern have always been organized competitively this evidence is consistent with the theory s predictions

are government spending multipliers greater during periods of slack evidence from 20th century historical data a key question that has arisen during recent debates is whether government spending multipliers are larger during periods of slack some researchers and policymakers have argued that while government spending multipliers are estimated to be modest on average they might become greater during times when resources are underutilized auerbach and gorodnichenko 2012 forthcoming henceforth ag test this hypothesis and find larger multipliers dur

the effects of government purchases shocks review and estimates for the eu in this article we review the theoretical consequences of government purchases shocks for both closed and open economies followed by a discussion of the empirical literature next we provide our own estimates for the eu countries we find that an increase in government purchases raises output consumption and investment and reduces the trade balance however the stimulating effect is weaker and the trade balance reduction is larger for the more open eu economies consistent with larger leakage effects further we show that government purchases shocks in large eu economies have non negligible consequences for economic activity in the main trading partners

avoidable cost ride a double auction roller coaster the double auction trading institution has been highly efficient across diverse marginal cost market structures whether human subjects or zero intelligence robots populated those markets accordingly many researchers suspect that double auction performance transcends market structure and agent strategy but the authors show that large avoidable costs undermine the efficiency and stability of human subject double auctions and these low human efficiencies are simultaneously well above zero intelligence efficiencies their results dramatically illustrate the potential havoc wrought by highly competitive institutions when they must cope with nonconvex technologies copyright 1996 by american economic association

shapley value based pricing for auctions and exchanges abstract this paper explores how the shapley value can be used as the basis of a payment rule for auctions and exchanges the standard shapley value is modified so that losing bidders do not make or receive any payments the new rule called the balanced winner contribution bwc rule satisfies a variation of myerson s balanced contribution property the payment rule is fair in the sense that with respect to reported values the members of every pair of traders make equal contributions to each other s share of the gains from trade bwc payments can be used in single item auctions and more complex auctions and exchanges with multiple items and package bidding a series of examples is presented to illustrate how the bwc rule works and how the payments compare to those based on competitive prices the core and the vickrey clarke groves mechanism

consumer surplus enhancing collusion and trade that collusion among sellers hurts buyers is a central tenet in economics we provide an oligopoly model in which collusion can raise consumer surplus a differentiated product duopoly operates in two geographically separated markets each market is home to a single firm but can import at a cost from the foreign firm under some circumstances a perfect cartel relative to duopolistic competition raises the price of the imported good and lowers the price of the home good this raises welfare for most consumers and increases aggregate consumer surplus a similar possibility result applies to autarky our analysis applies beyond the spatial setting

population technology and growth from malthusian stagnation to the demographic transition and beyond this paper develops a unied growth model that captures the historical evolution of population technology and output it encompasses theendogenous transitionbetween three regimes that have characterized economic development the economy evolves from amalthusianregime wheretechnologicalprogressis slow andpopulationgrowthprevents anysustainedriseinincomepercapita intoapost malthusianregime wheretechnological progress rises and population growth absorbs only part of output growth ultimately a demographic transition reverses the positive relationship between income and population growth andtheeconomyentersamoderngrowthregimewithreducedpopulationgrowth

real time forecasting with a mixed frequency var this article develops a vector autoregression var for time series which are observed at mixed frequencies quarterly and monthly the model is cast in state space form and estimated with bayesian methods under a minnesota style prior we show how to evaluate the marginal data density to implement a data driven hyperparameter selection using a real time dataset we evaluate forecasts from the mixed frequency var and compare them to standard quarterly frequency var and to forecasts from midas regressions we document the extent to which information that becomes available within the quarter improves the forecasts in real time this article has online supplementary materials

combining time variation and mixed frequencies an analysis of government spending multipliers in italy summary in this paper we propose a time varying parameter vector autoregression var model with stochastic volatility which allows for estimation on data sampled at different frequencies our contribution is twofold first we extend the methodology developed by cogley and sargent drifts and volatilities monetary policies and outcomes in the post wwii u s review of economic studies 2005 8 262 302 and primiceri time varying structural vector autoregressions and monetary policy review of economic studies 2005 72 821 852 to a mixed frequency setting in particular our approach allows for the inclusion of two different categories of variables high frequency and low frequency into the same time varying model second we use this model to study the macroeconomic effects of government spending shocks in italy over the 1988 q4 2013 q3 period italy as well as most other euro area economies is characterized by short quarterly time series for fiscal variables whereas annual data are generally available for a longer sample before 1999 our results show that the proposed time varying mixed frequency model improves on the performance of a simple linear interpolation model in generating the true path of the missing observations second our empirical analysis suggests that government spending shocks tend to have positive effects on output in italy the fiscal multiplier which is maximized at the 1 year horizon follows a u shape over the sample considered it peaks at around 1 5 at the beginning of the sample it then stabilizes between 0 8 and 0 9 from the mid 1990s to the late 2000s before rising again to above unity during the recent crisis copyright 2015 john wiley sons ltd

understanding per capita income growth in preindustrial europe in a malthusian environment per capita incomes are stagnant meaning they cannot exhibit sustained growth however they can still display volatility and persistence when hit by shocks this article simulates a malthusian model with realistic life cycle structure and stochastic and accelerating growth in land productivity we find that differences across simulated economies are quantitatively similar to those found in recently compiled data over gdp per capita for several european countries before 1800 this speaks to the relevance of the malthusian model for understanding preindustrial development in europe contrasting with contentions to the contrary in some of the existing literature

a theory of gradual coalition formation we study noncooperative multilateral bargaining games based on underlying tu games in which coalitions can renegotiate their agreements we distinguish between models in which players continue to bargain after implementing agreements reversible actions and models in which players who implement agreements must leave the game irreversible actions we show that renegotiation always results in formation of the grand coalition if actions are reversible but that the process may otherwise end with smaller coalitions on the other hand we show that the grand coalition cannot form in one step if the core of the game is empty irrespective of the reversibility of actions agreements between players form the basis of much that game theory seeks to explain there are obviously many useful ways to categorize such agreements in multilateral negotiations that is with more than two participants it seems natural to distinguish between cases in which the coalition forms in one step and those in which the coalition grows to its eventual size by attracting new members thus recipients of marshall aid collectively agreed to american terms at the ceec in 1947 whereas a strict subset of these countries agreed to the schuman plan in 1950 with the other current members joining the eu over time similarly negotiations on climate change culminated in universal agreement at rio in 1992 whereas india and china only agreed to reduce cfc emissions in london in 1990 after other countries had signed up to the montreal protocol finally un security council resolution 242 urged that a multilateral conference be set up to establish a comprehensive settlement in the middle east whereas the process initiated by the oslo agreements and arguably camp david has consisted of a sequence of agreements between israel and its neighbours we will refer to cases in which the grand coalition forms in one step as involving immediate coalition formation or icf for short and cases in which a coalition grows as involving gradual coalition formation

how the client effect moderates price competition why is unregulated competition supposed to drive price down to ruinous levels in some high fixed cost low marginal cost industries e g railroads but not in others e g hotels we argue that price competition is moderated in high fixed cost low marginal cost industries when the value one consumer realizes from the service is affected by the characterics of other consumers we develop a simple model of this client effect using the example of the demand for hotels and then generalize the implications of our model to other industries

post malthusian dynamics in pre industrial scandinavia theories of economic growth hypothesize that the transition from pre industrial stagnation to sustained growth is associated with a post malthusian phase in which technological progress raises income and spurs population growth while offsetting diminishing returns to labor evidence suggests that england was characterized by post malthusian dynamics preceding the industrial revolution however given england s special position as the forerunner of the industrial revolution it is unclear if a transitory post malthusian period is a general phenomenon using data from denmark norway and sweden this research provides evidence for the existence of a post malthusian phase in the transition from stagnation to growth in scandinavia

malthus to solow a unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies our theory also explains the industrial revolution which is the transition from an era when per capita incomes are stagnant to one with sustained growth the authors use a standard growth model with several technologies the first denoted the malthus technology requires land labor and reproducible capital as inputs the second denoted the solow technology does not require land the authors show that in the early stages of development only the malthus technology is used and due to population growth living standards are stagnant despite technological progress eventually technological progress causes the solow technology to become profitable and both technologies are employed at this point living standards improve since population growth has less influence on per capita income growth in the limit the economy behaves like a standard solow growth model excerpt