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From Smith to Schumpeter: A Theory of Take-Off and Convergence to Sustained Growth

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Author Info

  • Pietro F. Peretto

Abstract

This paper develops a theory of the emergence of modern innovation-driven Schumpeterian growth. It uses a tractable model that yields a closed-form solution, consisting of an S-shaped (i.e., logistic-like) time path of firm size and a set of equations that express the relevant endogenous variables – GDP, product variety and product quality, consumption, the shares of GDP earned by the factors of production – as functions of firm size. It also obtains closed-form solutions for the dates of the events that drive the economy'’s phase transitions as functions of the fundamentals. The resulting path of GDP per capita consists of a convex-concave profile replicating the key feature of long-run data: an accelerating phase followed by a deceleration with convergence to a stationary growth rate. Compared to other availables theories, the paper focuses on the within-industry forces that regulate the response of firms and entrepreneurs to Smithian market expansion.

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Bibliographic Info

Paper provided by Duke University, Department of Economics in its series Working Papers with number 13-10.

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Length: 40
Date of creation: 2013
Date of revision:
Handle: RePEc:duk:dukeec:13-10

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Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
Phone: (919) 660-1800
Fax: (919) 684-8974
Web page: http://econ.duke.edu/

Related research

Keywords: Endogenous Growth; Firm Size; Market Structure; Take-off;

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Cited by:
  1. Mauro Rota & Luca Spinesi, 2013. "At the Onset of the original capital accumulation," Departmental Working Papers of Economics - University 'Roma Tre' 0179, Department of Economics - University Roma Tre.

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