Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs

This article formalizes the theoretical interconnections among four post–industrial revolution phenomena—the industrialization and growth take-off of rich northern nations, massive global income divergence, and rapid trade expansion. In stages-of-growth model, the four phenomena are jointly endogenous and are triggered by falling trade costs. In the first growth stage (with high trade costs) industry is dispersed internationally, and growth is low. In the second (medium trade costs), the North industrializes rapidly, growth take-off, and the South diverges. In the third (low trade costs), high growth and global divergence become self-sustaining. In the fourth stage, when the cases of “trading” ideas decreases, the South quickly industrializes and converges.