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The great divergence: history or path dependence? Results from the Americas

Author

Listed:
  • Steve de Castro

    (Departamento de Economia (Department of Economics) Faculdade de Economia, Administração, Contabilidade e Ciência da Informação e Documentação (FACE) (Faculty of Economics, Administration, Accounting and Information Science) Universidade de Brasília)

Abstract

This paper synthesizes our results from work on growth in the Americas and especially on the former slave regions. Firstly, we found that significant differences in GDPpp emerged only after slavery was abandoned. At abolition, there was a fall in almost all of them but most started to grow again, some quite rapidly. Secondly, we formalized the notion of history dependence in annual time series of GDP per person as a homogenous Poisson stochastic process and tested the series for Brazil, 1822-2000 and the USA, 1869-1996. The US passed, but Brazil did not, due to its stagnation in the late 19th century. Thirdly the principal-agent theory of the firm is then used to explain the stagnation. By at least the early 19th century, New World slave plantations had evolved some of the mechanisms firms use to supervise the effort of their workers at multiple tasks, which increase productivity. Since abolition meant they had to pay their workers more, then without technical progress or changes in product prices, they may become unviable and the economy can collapse into lower-productivity family farms or worse.

Suggested Citation

  • Steve de Castro, 2010. "The great divergence: history or path dependence? Results from the Americas," Working papers - Textos para Discussao do Departamento de Economia da Universidade de Brasilia 333, Departamento de Economia da Universidade de Brasilia.
    • Handle: RePEc:brs:wpaper:333
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    File URL: http://e-groups.unb.br/face/eco/textos/didaticos/WP%20333.pdf
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    More about this item

    Keywords

    economic growth; history dependence; firms; markets; incentives; slavery;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative

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