The evolution of markets and the revolution of industry: a unified theory of growth

Klaus Desmet and Stephen Parente ()

Journal of Economic Growth, 2012, vol. 17, issue 3, 205-234

Abstract: This paper puts forth a theory of the Industrial Revolution whereby an economy transitions from Malthusian stagnation to modern economic growth as firms implement cost-reducing production technologies. This take-off of industry occurs once the market reaches a critical size. The mechanism by which market size affects process innovation relies on two overlooked facts pre-dating England’s Industrial Revolution: the expansion in the variety of consumer goods and the increase in firm size. We demonstrate this mechanism in a dynamic general equilibrium model calibrated to England’s long-run development, and explore how various factors affected the timing of its industrialization. Copyright Springer Science+Business Media, LLC 2012

Keywords: Unified growth theory; Industrial Revolution; Innovation; Competition; Consumer Revolution; 014; 033; 041; N33 (search for similar items in EconPapers)
Date: 2012
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Related works:
Working Paper: The Evolution of Markets and the Revolution of Industry: a unified theory of growth (2010)
Working Paper: The Evolution of Markets and the Revolution of Industry: A Unified Theory of Growth (2009)
Working Paper: The evolution of markets and the revolution of industry: A unified theory of growth (2009)
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DOI: 10.1007/s10887-012-9080-y

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