The Evolution of Markets and the Revolution of Industry: A Quantitative Model of England's Development, 1300-2000

Stephen Parente () and Klaus Desmet

No 7290, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper argues that an economy's transition from Malthusian stagnation to modern growth requires markets to reach a critical size, and competition to reach a critical level of intensity. By allowing an economy to produce a greater variety of goods, a larger market makes goods more substitutable, raising the price elasticity of demand, and lowering mark-ups. Firms must then become larger to break even, which facilitates amortizing the fixed costs of innovation. We demonstrate our theory in a dynamic general equilibrium model calibrated to England's long-run development and explore how various factors affect the timing of takeoff.

Keywords: Competition; Industrial revolution; Innovation; Market revolution; Unified growth theory (search for similar items in EconPapers)
JEL-codes: N33 O14 O33 O41 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-cse, nep-dge, nep-his and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://cepr.org/publications/DP7290 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:7290

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP7290

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().