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Early development

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  • Marvin Goodfriend
  • John McDermott

Abstract

Long-term economic development involves four fundamental processes: the exploitation of increasing returns to specialization, the transition from household to market production, knowledge and human capital accumulation, and industrialization. In this paper, we integrate these processes into a coherent framework for thinking about economic history. Pre-industrial development is driven by increasing returns to specialization made possible by a growing population. Increasing specialization eventually activates a learning technology and initiates industrial growth, which carries the economy to a fully market-based balanced growth path. Among other things, we attribute a role to population and market size that is consistent with the evidence.

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  • Marvin Goodfriend & John McDermott, 1994. "Early development," Working Paper 94-02, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:94-02
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    References listed on IDEAS

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    1. Goodfriend, Marvin & McDermott, John, 1995. "Early Development," American Economic Review, American Economic Association, vol. 85(1), pages 116-133, March.
    2. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
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