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The Dynamics of Smithian Growth


  • Morgan Kelly


This paper analyzes the evolution of an economy where growth is driven by increased specialization caused by the geographical expansion of markets. It proves that such Smithian growth exhibits generic threshold behavior. Below a critical density of transport linkages, the economy is split into isolated local markets with limited specialization. Above the critical density, these markets begin to fuse into a large, economywide market causing growth to accelerate. This allows an explicit test of the consensus among historians of Sung dynasty China that the economic revolution during that period was a result of commercialization caused by the creation of a national waterway network.

Suggested Citation

  • Morgan Kelly, 1997. "The Dynamics of Smithian Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 939-964.
  • Handle: RePEc:oup:qjecon:v:112:y:1997:i:3:p:939-964.

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