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A Pomeranzian Growth Theory of the Great Divergence

Shuhei Aoki

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Abstract: In this study, I construct a growth model of the Great Divergence, which formalizes Pomeranz's (2000) hypothesis that the relief of land constraints in Europe caused divergence in economic growth between Europe and China since the 19th century. The model includes the agricultural and manufacturing sectors. The agricultural sector produces subsistence goods from land, intermediate goods made in the manufacturing sector, and labor. The manufacturing sector produces goods from labor and its productivity grows through learning-by-doing. Households make fertility decisions. In the model, a large exogenous positive shock in land supply causes the transition of the economy from the Malthusian state, in which all workers are engaged in agricultural production and per capita income is constant, to the non-Malthusian state, in which the share of workers engaging in agricultural production gradually decreases and per capita income grows at a roughly constant growth rate. Quantitative predictions of the model provide several insights into the causes of the Great Divergence.

Date: 2021-08, Revised 2022-06
New Economics Papers: this item is included in nep-evo, nep-gro, nep-his and nep-isf
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Handle: RePEc:arx:papers:2108.03110