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The Evolution of Markets and the Revolution of Industry: A Unified Theory of Growth

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  • Klaus Desmet

    (Universidad Carlos III, CEPR and Centro Studi Luca d’Agliano)

  • Stephen L. Parente

    (University of Illinois and CRENoS)

Abstract

This paper puts forth a unified theory of growth that captures a number of relevant features of countries transitions from stagnant, predominantly rural economies to vibrant, industrialized economies that have been overlooked by the literature. In our theory, increasing variety of consumer goods and increasing firm size, which are the consequence of a gradual expansion in the market, sow the seeds for process innovation and an economy’s take-off. We demonstrate this mechanism in a dynamic general equilibrium model calibrated to England’s long-run development, and explore how various factors affected the timing of its take-off.

Suggested Citation

  • Klaus Desmet & Stephen L. Parente, 2009. "The Evolution of Markets and the Revolution of Industry: A Unified Theory of Growth," Development Working Papers 284, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:284
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    More about this item

    Keywords

    Uni ed Growth Theory; Industrial Revolution; Innovation; Competition; Market Revolution;
    All these keywords.

    JEL classification:

    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913

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