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

Klaus Desmet, Avner Greif, Stephen L. Parente

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish (US)
JournalJournal of Economic Growth
Volume25
Issue number1
DOIs
StatePublished - Mar 1 2020

Keywords

  • Adoption of technology
  • Craft guilds
  • Endogenous institutions
  • Great Divergence
  • Industrial Revolution
  • Innovation
  • Inter-city competition
  • Market size
  • Spatial competition

ASJC Scopus subject areas

  • Economics and Econometrics

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