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Trade, Technology and the Great Divergence

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  • Kevin H. O’Rourke

    (Oxford University)

  • Ahmed S. Rahman

    ()
    (United States Naval Academy)

  • Alan M. Taylor

    (University of Virginia)

Abstract

This paper develops a model that captures the key features of the Industrial Revolution and the Great Divergence between the industrializing \North" and the lagging \South." In particular, a convincing story is needed for why North-South divergence occurred so dramatically during the late 19th Century, a good hundred years after the beginnings of the Industrial Revolution. To this end we construct a trade/growth model that includes both endogenous biased technologies and intercontinental trade. The Industrial Revolution began as a sequence of unskilled-labor intensive innovations which initially incited fertil- ity increases and limited human capital formation in both the North and the South. The subsequent co-evolution of trade and technological growth however fostered an inevitable di- vergence in living standards - the South increasingly specialized in production that worsened their terms of trade and spurred even greater fertility increases and educational declines. Biased technological changes in both regions only reinforced this pattern. The model high- lights how pronounced divergence ultimately arose from interactions between specialization from trade and technological forces.

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File URL: http://www.usna.edu/EconDept/RePEc/usn/wp/usnawp35.pdf
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Bibliographic Info

Paper provided by United States Naval Academy Department of Economics in its series Departmental Working Papers with number 35.

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Length: 38 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:usn:usnawp:35

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  1. Acemoglu, Daron, 2002. "Directed Technical Change," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 781-809, October.
  2. Oded Galor, 2004. "From Stagnation to Growth: Unified Growth Theory," GE, Growth, Math methods 0409003, EconWPA.
  3. Oded_Galor & Andrew Mountford, 2006. "Trade and the Great Divergence: The Family Connection," Working Papers 2006-01, Brown University, Department of Economics.
  4. Oded Galor & Andrew Mountford, 2008. "Trading Population for Productivity: Theory and Evidence," Working Papers 2008-2, Brown University, Department of Economics.
  5. Kevin H. O'Rourke & Ahmed S. Rahman & Alan M. Taylor, 2008. "Luddites and the Demographic Transition," NBER Working Papers 14484, National Bureau of Economic Research, Inc.
  6. Kris James Mitchener & Se Yan, 2010. "Globalization, Trade & Wages: What Does History tell us about China?," NBER Working Papers 15679, National Bureau of Economic Research, Inc.
  7. Galor, Oded & Mountford, Andrew, 2002. "Why are a Third of People Indian and Chinese? Trade, Industrialization and Demographic Transition," CEPR Discussion Papers 3136, C.E.P.R. Discussion Papers.
  8. O'Rourke, Kevin H & Taylor, Alan M & Williamson, Jeffrey G, 1996. "Factor Price Convergence in the Late Nineteenth Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 499-530, August.
  9. O'Rourke, Kevin & Williamson, Jeffrey G., 1994. "Late Nineteenth-Century Anglo-American Factor-Price Convergence: Were Heckscher and Ohlin Right?," The Journal of Economic History, Cambridge University Press, vol. 54(04), pages 892-916, December.
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Cited by:
  1. Comin, Diego & Mestieri, Marti, 2013. "If Technology Has Arrived Everywhere, Why Has Income Diverged?," TSE Working Papers 13-409, Toulouse School of Economics (TSE).

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