The Rise of the English Economy 1300-1900: A Lasting Response to Demographic Shocks

We construct a Dynamic Stochastic General Equilibrium model of the interaction between demography and the economy for six centuries of English history. At the core of the four overlapping generations, rational expectations model is household choice about target number and quality of children, as well as female age at first marriage. The parameters are formally estimated rather than calibrated. Data on births, deaths, population and the real wage, and data moments can be closely matched by the estimated model. We show that the marriage age rises to reach that typical of the Western European Marriage Pattern at the end of the high mortality epoch of the 14th century. Higher marriage age lowers costs of child quality so that human capital gradually accumulates over the generations. But it does so more slowly than that of population initially, so that there is a negative correlation between population and wage. Ultimately the growth of human capital catches up with that of population and triggers a break out from the Malthusian equilibrium at the end of the 18th century. Without the contribution of late female age to human capital, human capital would have been about 20% of what it actually was around 1800, and real wages would only have attained about half their actual value.