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Advent of Industrial Mass Production: Three Stages of Economic Development

Rudrani Bhattacharya and Satya Das ()

The B.E. Journal of Macroeconomics, 2008, vol. 8, issue 1, 1-47

Abstract: This paper develops a human-capital-based endogenous growth scenario in which an economy initially produces the agricultural good, characterized by diminishing returns to scale, then produces `traditional manufacturing' under constant-returns and finally produces `modern manufacturing' under increasing-returns. Transition dates are endogenous and depend on the non-essentiality of the industrial goods in preferences and fixed costs in the technology of the modern manufacturing. Each transition is followed by a jump in the long-run growth rate of real income. The theoretical model is calibrated to U.S. historical data. It `predicts' the first transition to occur around 1820s and the second transition to happen around 1900.

Date: 2008
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DOI: 10.2202/1935-1690.1642

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