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Why, indeed, in America? Theory, History, and the Origins of Modern Economic Growth

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  • Paul M. Romer

Abstract

When they are used together, economic history and new growth theory give a more complete picture of technological change than either can give on its own. An empirical strategy for studying growth that does not use historical evidence is likely to degenerate into sterile model testing exercises. Historical analysis that uses the wrong kind of theory or no theory may not emphasize the lessons about technology that generalize. The complementarity between these fields is illustrated by an analysis of early industrialization. The key theoretical observation is that larger markets and larger stocks of resources create substantially bigger incentives for discovering new ways to use the resources. This simple insight helps explain why the techniques of mass production emerged in the United States during the first half of the 19th century. It also helps explain how a narrow advantage in the techniques of mass production for a small set of goods grew into broad position of industrial supremacy by the middle of the 20th century.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5443.

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Date of creation: Jan 1996
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Publication status: published as American Economic Review, Vol. 86, no. 2 (May 1996): 202-206.
Handle: RePEc:nbr:nberwo:5443

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  1. Gregory Mankiw, 1995. "The Growth of Nations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 275-326.
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Cited by:
  1. Diewert, W. Erwin & Fox, Kevin J., 2008. "On the estimation of returns to scale, technical progress and monopolistic markups," Journal of Econometrics, Elsevier, Elsevier, vol. 145(1-2), pages 174-193, July.
  2. Davis, Lewis S., 2008. "Scale effects in growth: A role for institutions," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 66(2), pages 403-419, May.
  3. Philip Auerswald, 2010. "Entry and Schumpeterian profits," Journal of Evolutionary Economics, Springer, Springer, vol. 20(4), pages 553-582, August.
  4. Auerswald, Philip & Kauffman, Stuart & Lobo, Jose & Shell, Karl, 2000. "The production recipes approach to modeling technological innovation: An application to learning by doing," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 24(3), pages 389-450, March.
  5. Jonathan Temple & Hans-Joachim Voth, 1996. "Human capital, equipment investment, and industrialization," Economics Papers 22 & 116, Economics Group, Nuffield College, University of Oxford.
  6. Ian McLean, 2004. "Australian Economic Growth in Historical Perspective," Method and Hist of Econ Thought, EconWPA 0410003, EconWPA.
  7. Pope, Clayne, 2009. "Measuring the distribution of material well-being: U.S. trends," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(1), pages 66-78, January.
  8. Meissner, Christopher M., 2014. "Growth from Globalization? A View from the Very Long Run," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 1033-1069 Elsevier.
  9. Barbier, Edward B., 2004. "Agricultural Expansion, Resource Booms and Growth in Latin America: Implications for Long-run Economic Development," World Development, Elsevier, Elsevier, vol. 32(1), pages 137-157, January.
  10. Meral (IBRAIM) KAGITCI & Mirela Elena NICHITA & Marcel VULPOI, 2014. "The Impact Of Public Debt On Economic Growth Within Eu," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 4, pages 65-72, July.
  11. Ren, Liqian & Rangazas, Peter, 2003. "Retirement saving and development traps," Journal of Development Economics, Elsevier, Elsevier, vol. 70(1), pages 119-132, February.
  12. Ogunleye, Eric Kehinde, 2008. "Natural resource abundance in Nigeria: From dependence to development," Resources Policy, Elsevier, Elsevier, vol. 33(3), pages 168-174, September.
  13. Arora, Ashish & Fosfuri, Andrea & Gambardella, Alfonso, 2001. "Specialized technology suppliers, international spillovers and investment: evidence from the chemical industry," Journal of Development Economics, Elsevier, Elsevier, vol. 65(1), pages 31-54, June.

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