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The evolution of markets and the revolution of industry: a unified theory of growth

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  • Klaus Desmet

    ()

  • Stephen Parente

    ()

Abstract

This paper puts forth a theory of the Industrial Revolution whereby an economy transitions from Malthusian stagnation to modern economic growth as firms implement cost-reducing production technologies. This take-off of industry occurs once the market reaches a critical size. The mechanism by which market size affects process innovation relies on two overlooked facts pre-dating England’s Industrial Revolution: the expansion in the variety of consumer goods and the increase in firm size. We demonstrate this mechanism in a dynamic general equilibrium model calibrated to England’s long-run development, and explore how various factors affected the timing of its industrialization. Copyright Springer Science+Business Media, LLC 2012

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 17 (2012)
Issue (Month): 3 (September)
Pages: 205-234

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Handle: RePEc:kap:jecgro:v:17:y:2012:i:3:p:205-234

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Web page: http://www.springerlink.com/link.asp?id=102931

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Keywords: Unified growth theory; Industrial Revolution; Innovation; Competition; Consumer Revolution; 014; 033; 041; N33;

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Cited by:
  1. Kourtellos, Andros & Stylianou, Ioanna & Tan, Chih Ming, 2013. "Failure to launch? The role of land inequality in transition delays," European Economic Review, Elsevier, vol. 62(C), pages 98-113.
  2. Desmet, Klaus & Parente, Stephen, 2013. "Resistance to Technology Adoption: The Rise and Decline of Guilds," CEPR Discussion Papers 9439, C.E.P.R. Discussion Papers.
  3. Alex Trew, . "Spatial Takeoff in the First Industrial Revolution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
  4. Attar, M. Aykut, 2013. "Growth and Demography in Turkey: Economic History vs. Pro-Natalist Rhetoric," MPRA Paper 47275, University Library of Munich, Germany.
  5. Alex Trew, 2009. "Institutions and the Scale Effect," CDMA Working Paper Series 200906, Centre for Dynamic Macroeconomic Analysis, revised 03 Apr 2011.

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