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Spatial competition, innovation and institutions: the Industrial Revolution and the Great Divergence

Klaus Desmet (), Avner Greif () and Stephen L. Parente ()
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Stephen L. Parente: University of Illinois at Urbana-Champaign

Journal of Economic Growth, 2020, vol. 25, issue 1, No 1, 35 pages

Abstract: Abstract This paper considers the possible contribution of spatial competition to the Industrial Revolution and the Great Divergence. Rather than exclusively focusing on the incentives of producers to adopt labor-saving technology, we also consider the incentives of factor suppliers’ organizations such as craft guilds to resist. Once we do so, industrialization no longer depends on market size per se, but on spatial competition between the guilds’ jurisdictions. We substantiate our theory’s claim of spatial competition being an important channel for industrialization (i) by providing historical evidence on the relation between spatial competition, craft guilds and innovation, and (ii) by showing that the calibrated model correctly predicts the timings of the Industrial Revolution and the Great Divergence.

Keywords: Industrial Revolution; Great Divergence; Craft guilds; Spatial competition; Inter-city competition; Market size; Endogenous institutions; Innovation; Adoption of technology (search for similar items in EconPapers)
JEL-codes: N10 O11 O14 O31 O43 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence (2018) Downloads
Working Paper: Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence (2017) Downloads
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DOI: 10.1007/s10887-019-09173-3

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