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Why, indeed, in America? Theory, History, and the Origins of Modern Economic Growth

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  • Paul M. Romer

Abstract

When they are used together, economic history and new growth theory give a more complete picture of technological change than either can give on its own. An empirical strategy for studying growth that does not use historical evidence is likely to degenerate into sterile model testing exercises. Historical analysis that uses the wrong kind of theory or no theory may not emphasize the lessons about technology that generalize. The complementarity between these fields is illustrated by an analysis of early industrialization. The key theoretical observation is that larger markets and larger stocks of resources create substantially bigger incentives for discovering new ways to use the resources. This simple insight helps explain why the techniques of mass production emerged in the United States during the first half of the 19th century. It also helps explain how a narrow advantage in the techniques of mass production for a small set of goods grew into broad position of industrial supremacy by the middle of the 20th century.

Suggested Citation

  • Paul M. Romer, 1996. "Why, indeed, in America? Theory, History, and the Origins of Modern Economic Growth," NBER Working Papers 5443, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5443
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    References listed on IDEAS

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    1. Gregory Mankiw, 1995. "The Growth of Nations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 275-326.
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    Cited by:

    1. Auerswald, Philip & Kauffman, Stuart & Lobo, Jose & Shell, Karl, 2000. "The production recipes approach to modeling technological innovation: An application to learning by doing," Journal of Economic Dynamics and Control, Elsevier, vol. 24(3), pages 389-450, March.
    2. Amavilah, Voxi Heinrich, 2017. "The African origins of Euro-American development: Pins on an empirical roadmap," MPRA Paper 79925, University Library of Munich, Germany.
    3. Rodriguez-Pose, Andres & von Berlepsch, Viola, 2012. "When migrants rule: the legacy of mass migration on economic development in the US," CEPR Discussion Papers 9122, C.E.P.R. Discussion Papers.
    4. Frederic Jennings, 2010. "Toward a Horizonal Theory of Justice: Efficiency, Equity, Rights and Capabilities in a Free Market Economy," Forum for Social Economics, Taylor & Francis Journals, vol. 39(1), pages 77-87, January.
    5. Liu, Dan & Meissner, Christopher M., 2015. "Market potential and the rise of US productivity leadership," Journal of International Economics, Elsevier, vol. 96(1), pages 72-87.
    6. repec:lan:wpaper:541200 is not listed on IDEAS
    7. Barbier,Edward B., 2007. "Natural Resources and Economic Development," Cambridge Books, Cambridge University Press, number 9780521706513.
    8. Ian W. Mclean, 2004. "Australian Economic Growth in Historical Perspective," The Economic Record, The Economic Society of Australia, vol. 80(250), pages 330-345, September.
    9. Jan M.P. de Kok, 2000. "The Impact of Firm-Provided Training on Production: Testing for Firm-Size Effects," Tinbergen Institute Discussion Papers 00-073/3, Tinbergen Institute.
    10. Pope, Clayne, 2009. "Measuring the distribution of material well-being: U.S. trends," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 66-78, January.
    11. Temple, Jonathan & Voth, Hans-Joachim, 1998. "Human capital, equipment investment, and industrialization," European Economic Review, Elsevier, vol. 42(7), pages 1343-1362, July.
    12. Diewert, W. Erwin & Fox, Kevin J., 2008. "On the estimation of returns to scale, technical progress and monopolistic markups," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 174-193, July.
    13. Davis, Lewis S., 2008. "Scale effects in growth: A role for institutions," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 403-419, May.
    14. Ren, Liqian & Rangazas, Peter, 2003. "Retirement saving and development traps," Journal of Development Economics, Elsevier, vol. 70(1), pages 119-132, February.
    15. Thomas Doring & Jan Schnellenbach, 2006. "What do we know about geographical knowledge spillovers and regional growth?: A survey of the literature," Regional Studies, Taylor & Francis Journals, vol. 40(3), pages 375-395.
    16. Ogunleye, Eric Kehinde, 2008. "Natural resource abundance in Nigeria: From dependence to development," Resources Policy, Elsevier, vol. 33(3), pages 168-174, September.
    17. Koichi Futagami & Yasushi Ohkusa, 2003. "The Quality Ladder and Product Variety: Larger Economies May Not Grow Faster," The Japanese Economic Review, Japanese Economic Association, vol. 54(3), pages 336-351.
    18. Meral (IBRAIM) KAGITCI & Mirela Elena NICHITA & Marcel VULPOI, 2014. "The Impact Of Public Debt On Economic Growth Within Eu," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 4, pages 65-72, July.
    19. Barbier, Edward B., 2004. "Agricultural Expansion, Resource Booms and Growth in Latin America: Implications for Long-run Economic Development," World Development, Elsevier, vol. 32(1), pages 137-157, January.
    20. JunJie Wu & Munisamy Gopinath, 2008. "What Causes Spatial Variations in Economic Development in the United States?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 392-408.
    21. Robert Huggins & Piers Thompson, 2015. "Entrepreneurship, innovation and regional growth: a network theory," Small Business Economics, Springer, vol. 45(1), pages 103-128, June.
    22. Philip Auerswald, 2010. "Entry and Schumpeterian profits," Journal of Evolutionary Economics, Springer, vol. 20(4), pages 553-582, August.
    23. Meissner, Christopher M., 2014. "Growth from Globalization? A View from the Very Long Run," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 1033-1069 Elsevier.
    24. Arora, Ashish & Fosfuri, Andrea & Gambardella, Alfonso, 2001. "Specialized technology suppliers, international spillovers and investment: evidence from the chemical industry," Journal of Development Economics, Elsevier, vol. 65(1), pages 31-54, June.

    More about this item

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations

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