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From Smith to Schumpeter: A Theory of Take-off and Convergence to Sustained Growth

Listed author(s):
  • Pietro Peretto

The growth literature on the Industrial Revolution has produced novel insights that have changed the way economists think about the issue. Most of the available models, however, focus on the household and do not put industrial activity at the center of the analysis. Consequently, they leave out much that should be a prominent part of the story. According to Mokyr (2005) for example, the challenge for theory is to explain not only the quantitative change in growth rates, but also the qualitative transformation of the economy as sustained growth fueled by technological change become one of its persistent and thus defining features. In this paper I propose a model of the qualitative transformation of the economy that assigns the starring role to industry. I introduce land in a Schumpeterian growth model to characterize the transition to sustained growth. A distinctive feature of the model I propose is that it yields a closed-form solution for the transition path. Consequently, it provides an analytically transparent characterization of the dates of the events that drive the economy's phase transitions. In particular, it provides a structural mapping from fundamentals to the key turning points — take-offs, inflection, etc. — that characterize the shape of the economy's path.

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File URL: http://degit.sam.sdu.dk/papers/degit_17/C017_009.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c017_009.

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Length: 33 pages
Date of creation: Sep 2012
Handle: RePEc:deg:conpap:c017_009
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  1. Klaus Desmet & Stephen Parente, 2012. "The evolution of markets and the revolution of industry: a unified theory of growth," Journal of Economic Growth, Springer, vol. 17(3), pages 205-234, September.
  2. Kelly, M., 1996. "The Dynamics of Smithian growth," Papers 96/9, College Dublin, Department of Political Economy-.
  3. Holger Strulik & Klaus Prettner & Alexia Prskawetz, 2013. "The past and future of knowledge-based growth," Journal of Economic Growth, Springer, vol. 18(4), pages 411-437, December.
  4. Mokyr, Joel, 2005. "Long-Term Economic Growth and the History of Technology," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 17, pages 1113-1180 Elsevier.
  5. Peretto, Pietro F., 1999. "Industrial development, technological change, and long-run growth," Journal of Development Economics, Elsevier, vol. 59(2), pages 389-417, August.
  6. Oded Galor, 2011. "Unified Growth Theory," Economics Books, Princeton University Press, edition 1, number 9477.
  7. James B. Ang & Jakob B. Madsen, 2011. "Can Second-Generation Endogenous Growth Models Explain the Productivity Trends and Knowledge Production in the Asian Miracle Economies?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1360-1373, November.
  8. Jones, Charles I., 2005. "Growth and Ideas," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 16, pages 1063-1111 Elsevier.
  9. Peretto, Pietro F, 1998. "Technological Change, Market Rivalry, and the Evolution of the Capitalist Engine of Growth," Journal of Economic Growth, Springer, vol. 3(1), pages 53-80, March.
  10. Mokyr, Joel, 2010. "The Contribution of Economic History to the Study of Innovation and Technical Change," Handbook of the Economics of Innovation, Elsevier.
  11. Galor, Oded, 2005. "From Stagnation to Growth: Unified Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 4, pages 171-293 Elsevier.
  12. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
  13. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
  14. Madsen, Jakob B., 2010. "The anatomy of growth in the OECD since 1870," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 753-767, September.
  15. Morgan Kelly, 1997. "The Dynamics of Smithian Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 939-964.
  16. Oded Galor, 2011. "Unified Growth Theory and Comparative Development," Rivista di Politica Economica, SIPI Spa, issue 2, pages 9-21, April-Jun.
  17. Jakob Madsen & James Ang & Rajabrata Banerjee, 2010. "Four centuries of British economic growth: the roles of technology and population," Journal of Economic Growth, Springer, vol. 15(4), pages 263-290, December.
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