Year: 2002
Type: article
Abstract: omies were roughly constant over the very long run: per capita wage income, output, and con-sumption did not grow. Modern industrial econ-omies, on the other hand, enjoy unprecedented and seemingly endless growth in living stan-dards. In this paper, we provide a model in which the transition from constant to growing living standards is inevitable given positive rates of total factor productivity growth and involves no change in the structure of the econ-omy (parameters describing preferences, tech-nology, and policy).1 In particular, the transition from stagnant to growing living standards oc-curs when profit-maximizing firms, in response to technological progress, begin employing a less land-intensive production process that, al-though available throughout history, was not previously profitable to operate. In addition, this transition appears to be consistent with features of development during and following the indus-trial revolution. The pioneering macroeconomics textbook,
Source: American Economic Review
Authors: Gary D Hansen, Edward C Prescott
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4250568676