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Barriers and the transition to modern growth

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  • L. Rachel Ngai
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    Abstract

    This paper studies how differences in the size of barriers to capital accumulation can account for differences in long run economic development paths. In this model barriers affect both the beginning date and the pace of the modern economic growth. A fundamental property of the model is that cross-country income differences matches the inverted U-shape pattern over time as observed in the data, hence implies a substantial fraction of existing income differences is really a transitional phenomeno n. Relative to papers that model this as steady state phenomenon, my model requires a smaller size of barriers to account for current disparities. Another important finding is that this transitional effect increases significantly when I include the fact that today's low-income countries have had higher population growth rates during their early development stage than did the currently rich countries. In a quantitative exercise I find that given the beginning dates of modern growth, the model accounts for a significant portion of current income differences.

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    File URL: http://eprints.lse.ac.uk/3530/
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 3530.

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    Length: 46 pages
    Date of creation: Jan 2003
    Date of revision:
    Handle: RePEc:ehl:lserod:3530

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    Keywords: Industrialization; income disparity; distortion;

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    1. Charles I. Jones, 1999. "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," NBER Working Papers 7375, National Bureau of Economic Research, Inc.
    2. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
    3. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
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    7. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    8. William J. Collins & Jeffrey G. Williamson, 1999. "Capital Goods Prices, Global Capital Markets and Accumulation: 1870-1950," NBER Working Papers 7145, National Bureau of Economic Research, Inc.
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    12. Marvin Goodfriend & John McDermott, 1994. "Early development," Working Paper 94-02, Federal Reserve Bank of Richmond.
    13. Tamura, Robert, 1996. "From decay to growth: A demographic transition to economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1237-1261.
    14. Edward C. Prescott, 1997. "Needed: a theory of total factor productivity," Staff Report 242, Federal Reserve Bank of Minneapolis.
    15. Yamamura, Kozo, 1977. "Success Illgotten? The Role of Meiji Militarism in Japan's Technological Progress," The Journal of Economic History, Cambridge University Press, vol. 37(01), pages 113-135, March.
    16. Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
    17. Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 359-382, December.
    18. Stephen L. Parente & Richard Rogerson & Randall Wright, 2000. "Homework in Development Economics: Household Production and the Wealth of Nations," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 680-687, August.
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    20. Tamura, Robert, 2002. "Human capital and the switch from agriculture to industry," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 207-242, December.
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