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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 L. Parente, 2010. "The Evolution of Markets and the Revolution of Industry: a unified theory of growth," 2010 Meeting Papers 990, Society for Economic Dynamics.
  2. Jakob B. Madsen & James B. Ang & Rajabrata Banerjee, 2010. "Four Centuries of British Economic Growth: The Roles of Technology and Population," CAMA Working Papers 2010-18, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Oded Galor, 2011. "Unified Growth Theory and Comparative Development," Rivista di Politica Economica, SIPI Spa, issue 2, pages 9-21, April-Jun.
  4. Peretto, Pietro F., 1997. "Technological Change, Market Rivalry, and the Evolution of theCapitalist Engine of Growth," Working Papers 97-06, Duke University, Department of Economics.
  5. Charles I. Jones, 2004. "Growth and Ideas," NBER Working Papers 10767, National Bureau of Economic Research, Inc.
  6. Mokyr, Joel, 2010. "The Contribution of Economic History to the Study of Innovation and Technical Change," Handbook of the Economics of Innovation, Elsevier.
  7. 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.
  8. Morgan Kelly, 1997. "The dynamics of Smithian growth," Open Access publications 10197/521, School of Economics, University College Dublin.
  9. 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.
  10. 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.
  11. Morgan Kelly, 1997. "The Dynamics of Smithian Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 939-964.
  12. 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.
  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. Peretto, Pietro F., 1999. "Industrial development, technological change, and long-run growth," Journal of Development Economics, Elsevier, vol. 59(2), pages 389-417, August.
  15. Oded Galor, 2005. "Unified Growth Theory," Development and Comp Systems 0504001, EconWPA.
  16. 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.
  17. 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.
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