Early Development

Marvin Goodfriend and John McDermott

American Economic Review, 1995, vol. 85, issue 1, 116-33

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. This paper integrates these processes into a coherent framework for thinking about economic history. Preindustrial 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, the authors attribute a role to population and market size that is consistent with the evidence. Copyright 1995 by American Economic Association.

Date: 1995
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