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

Pietro Peretto

No 13-10, Working Papers from Duke University, Department of Economics

Abstract: This paper develops a theory of the emergence of modern innovation-driven Schumpeterian growth. It uses a tractable model that yields a closed-form solution, consisting of an S-shaped (i.e., logistic-like) time path of firm size and a set of equations that express the relevant endogenous variables – GDP, product variety and product quality, consumption, the shares of GDP earned by the factors of production – as functions of firm size. It also obtains closed-form solutions for the dates of the events that drive the economy's phase transitions as functions of the fundamentals. The resulting path of GDP per capita consists of a convex-concave profile replicating the key feature of long-run data: an accelerating phase followed by a deceleration with convergence to a stationary growth rate. Compared to other availables theories, the paper focuses on the within-industry forces that regulate the response of firms and entrepreneurs to Smithian market expansion.

Keywords: Endogenous Growth; Firm Size; Market Structure; Take-off (search for similar items in EconPapers)
JEL-codes: E10 L16 O31 O40 (search for similar items in EconPapers)
Pages: 40
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-ent, nep-fdg, nep-his, nep-hme and nep-mac
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: From Smith to Schumpeter: A theory of take-off and convergence to sustained growth (2015)
Working Paper: From Smith to Schumpeter: A Theory of Take-off and Convergence to Sustained Growth (2012)
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