Land Inequality and the Origin of Divergence and Overtaking in the Growth Process

This research develops a unified growth theory that captures the transition from the domination of geographical factors\ in the determination of productivity in early stages of development to the domination of institutional factors in mature stages of development. It identifies a novel channel through which favorable geographical conditions that were inherently associated with inequality adversely affected the emergence of institutions that promote human capital accumulation. The research suggests that the distribution of land ownership within and across countries affected the nature of the transition from an agrarian to an industrial economy generating diverging growth patterns across countries. Furthermore, the qualitative change in the role of land in the process of industrialization brought about changes in the ranking of countries in the world income distribution. The basic premise of this research, regarding the negative effect of land inequality on public expenditure on education is established empirically based on cross-state data from the High School Movement in the first half of the 20th century in the US.