The research projects outlined in this proposal are motivated by two empirical facts: the lack of any clear trend in U.S. per capita income growth rates during the last 125 years and the acceleration of world population growth rates throughout a million years of history, from rates averaging only slightly more than zero to the present rates of around two percent per year. The first fact underlies the view expressed by Kaldor (1961) and embodied in many growth models that balanced, steady-state growth is a key fact our models should match. The second suggests the opposite: at least for the bulk of world history, population growth-and presumably per capita income growth as well-is anything but steady. The first project in this proposal will suggest a general theory of economic growth in which per capita income growth and population growth are tightly linked. As in many recent papers, economies grow because of growth in the stock of knowledge. However, the theory goes further to suggest that the stock of knowledge grows because of growth in the stock of people, the inventors of ideas. Endogenous population growth and the increasing returns to scale that results from the nonrivalry of ideas are viewed as the two key ingredients of a theory of endogenous growth. The second project examines the extent to which this basic theory can explain quantitatively the two facts that motivate the proposal. Several recent authors such as Klenow and Rodriguez-Clare (1997) and McGrattan and Schmitz (1998) note that there is surprisingly little work designed to examine the quantitative implications of the models of new growth theory and to attempt to distinguish among these models; this project is a step in this direction. The first application will conduct a growth accounting exercise for 20th century U.S. growth using a new growth theory framework. Preliminary results suggest that only about 1/4 of recent U.S. growth is associated with the long-run component (world population growth); the remaining 3/4 seems to be the result of transitory factors that mimic the appearance of a balanced growth path. The second application will add land to the endogenous fertility/ideas framework and argue that the population evidence examined by Kremer (1993) can be understood as one long transition path. Finally, the third project will examine the shape of the production function for new ideas, which plays a key role in new growth theory. Preliminary exploration of this production function reinforces the notion that balanced growth is unlikely to occur. The results from this proposal raise questions about the implicit assumption in much of growth theory, motivated partly by the Kaldor stylized facts, that our models should generate sustained, balanced growth forever.
