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From Smith to Schumpeter: A theory of take-off and convergence to sustained growth

Pietro Peretto ()

European Economic Review, 2015, vol. 78, issue C, 1-26

Abstract: This paper proposes a theory of the emergence of modern Schumpeterian growth that focuses on the within-industry forces that regulate the response of firms and entrepreneurs to Smithian market expansion and thus identifies an amplification mechanism that the literature has neglected. Because it solves the model in closed-form, the paper provides analytical insight on the forces that drive the economy׳s phase transition and the associated qualitative transformation of industrial activity. The resulting S-shaped path of GDP per capita replicates the key feature of the data: an accelerating phase followed by a deceleration with convergence to a stationary growth rate. The model also yields predictions for grand ratios like consumption/GDP, profits/GDP, and the distribution of income across factors of production.

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)
Date: 2015
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Related works:
Working Paper: From Smith to Schumpeter: A Theory of Take-Off and Convergence to Sustained Growth (2013) Downloads
Working Paper: From Smith to Schumpeter: A Theory of Take-off and Convergence to Sustained Growth (2012) Downloads
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DOI: 10.1016/j.euroecorev.2015.05.001

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