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Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence

Klaus Desmet (), Avner Greif () and Stephen Parente ()

No 24727, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A market-size-only theory of industrialization cannot explain why England developed nearly two centuries before China. One shortcoming of such a theory is its exclusive focus on producers. We show that once we incorporate the incentives of factor suppliers' organizations such as craft guilds, industrialization no longer depends on market size, but on spatial competition between the guilds' jurisdictions. We substantiate our theory (i) by providing historical and empirical evidence on the relation between spatial competition, craft guilds and innovation, and (ii) by showing the calibrated model correctly predicts the timings of the Industrial Revolution and the Great Divergence.

JEL-codes: N10 O11 O14 O31 O43 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-cse, nep-gro, nep-his, nep-ino, nep-tid and nep-ure
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Published as Klaus Desmet & Avner Greif & Stephen L. Parente, 2020. "Spatial competition, innovation and institutions: the Industrial Revolution and the Great Divergence," Journal of Economic Growth, vol 25(1), pages 1-35.

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Related works:
Journal Article: Spatial competition, innovation and institutions: the Industrial Revolution and the Great Divergence (2020) Downloads
Working Paper: Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence (2017) Downloads
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