Contents

Abstract 172

Keywords 173

1. Introduction 174

2. Historical evidence 178

2.1. TheMalthusianepoch 179

2.1.1. Incomepercapita 180

2.1.2. Incomeandpopulationgrowth 180

2.2.

2.2.1. Incomepercapita 186

2.2.2. Income and population growth 188

2.2.3. Industrialization and urbanization 191

2.2.4. Early stages of human capital formation 194

2.3. The Sustained Growth Regime 195

2.3.1. Growth of income per capita 195

2.3.2. The demographic transition 198

2.3.3. Industrial development and human capital formation 204

2.3.4. International trade and industrialization 216

2.4. The great divergence 218

3. The fundamental challenges 219

3.1. Mysteries of the growth process 220

3.2. The incompatibility of non-unified growth theories 221

3.2.1. Malthusian and Post-Malthusian theories 221

3.2.2. Theories of modern economic growth 223

3.3. Theories of the demographic transition and their empirical assessment 224

3.3.1. The decline in infant and child mortality 225

3.3.2. The rise in the level of income per capita 227

3.3.3. The rise in the demand for human capital 229

3.3.4. The decline in the gender gap 232

3.3.5. Other theories 234

Handbook of Economic Growth, Volume LA. Edited by Philippe Aghion and StevenN. Durlauf © 2005 Elsevier B.V. All rights reserved

DOI: 10.1016∕S1574-0684(05)01004-X

4. Unified growth theory 235

4.1. Fromstagnationtogrowth 237

4.1.1. Central building blocks 238

4.1.2. Thebasicstructureofthemodel 239

4.1.3. The dynamical system 245

4.1.4. From Malthusian stagnation to sustained growth 251

4.1.5. Major hypotheses and their empirical assessment 253

4.2. Complementarytheories 256

4.2.1. Alternative mechanisms for the emergence of human capital formation 257

4.2.2. Alternativetriggersforthedemographictransition 260

4.2.3. Alternative modeling of the transition from agricultural to industrial economy 262

5. Unified evolutionary growth theory 264

5.1. Human evolution and economic development 264

5.2. Natural selection and the origin of economic growth 266

5.2.1. Primary ingredients 268

5.2.2. Main hypotheses and their empirical assessment 271

5.3. Complementary mechanisms 273

5.3.1. The evolution of ability and economic growth 274

5.3.2. The evolution of life expectancy and economic growth 274

6. Differentialtakeoffsandthegreatdivergence 276

6.1. Non-unified theories 277

6.2. Unifiedtheories 279

6.2.1. Human capital promoting institutions 280

6.2.2. Globalization and the great divergence 280

7. Concluding remarks 283

Acknowledgements 285

References 285