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The great divergence: history or path dependence? Results from the Americas*

Steve Castro ()
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Steve Castro: Departamento de Economia (Department of Economics) Faculdade de Economia, Administração, Contabilidade e Ciência da Informação e Documentação (FACE) (Faculty of Economics, Administration, Accounting and Information Science) Universidade de Brasília

No 333, Working papers - Textos para Discussao do Departamento de Economia da Universidade de Brasilia from Departamento de Economia da Universidade de Brasilia

Abstract: This paper synthesizes our results from work on growth in the Americas and especially on the former slave regions. Firstly, we found that significant differences in GDPpp emerged only after slavery was abandoned. At abolition, there was a fall in almost all of them but most started to grow again, some quite rapidly. Secondly, we formalized the notion of history dependence in annual time series of GDP per person as a homogenous Poisson stochastic process and tested the series for Brazil, 1822-2000 and the USA, 1869-1996. The US passed, but Brazil did not, due to its stagnation in the late 19th century. Thirdly the principal-agent theory of the firm is then used to explain the stagnation. By at least the early 19th century, New World slave plantations had evolved some of the mechanisms firms use to supervise the effort of their workers at multiple tasks, which increase productivity. Since abolition meant they had to pay their workers more, then without technical progress or changes in product prices, they may become unviable and the economy can collapse into lower-productivity family farms or worse.

Keywords: economic growth; history dependence; firms; markets; incentives; slavery (search for similar items in EconPapers)
JEL-codes: C15 D21 D23 J41 N30 O41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2010-11
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