The evolution of markets and the revolution of industry: A unified theory of growth

Klaus Desmet; Stephen L. Parente

doi:10.1007/s10887-012-9080-y

The evolution of markets and the revolution of industry: A unified theory of growth

Klaus Desmet, Stephen L. Parente

Economics

Research output: Contribution to journal › Article

Abstract

This paper puts forth a theory of the Industrial Revolution whereby an economy transitions from Malthusian stagnation to modern economic growth as firms implement cost-reducing production technologies. This take-off of industry occurs once the market reaches a critical size. The mechanism by which market size affects process innovation relies on two overlooked facts pre-dating England's Industrial Revolution: the expansion in the variety of consumer goods and the increase in firm size. We demonstrate this mechanism in a dynamic general equilibrium model calibrated to England's long-run development, and explore how various factors affected the timing of its industrialization.

Original language	English (US)
Pages (from-to)	205-234
Number of pages	30
Journal	Journal of Economic Growth
Volume	17
Issue number	3
DOIs	https://doi.org/10.1007/s10887-012-9080-y
State	Published - Sep 1 2012

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Keywords

Competition
Consumer Revolution
Industrial Revolution
Innovation
Unified growth theory

ASJC Scopus subject areas

Economics and Econometrics

Cite this

Desmet, K., & Parente, S. L. (2012). The evolution of markets and the revolution of industry: A unified theory of growth. Journal of Economic Growth, 17(3), 205-234. https://doi.org/10.1007/s10887-012-9080-y

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10.1007/s10887-012-9080-y