Citation

Discussion Paper Details

Please find the details for DP7290 in an easy to copy and paste format below:

Full Details

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

Author(s): Klaus Desmet and Stephen Parente

Publication Date: May 2009

Keyword(s): Competition, Industrial Revolution, Innovation, Market Revolution and Unified Growth Theory

Programme Area(s): International Trade and Regional Economics

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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7290

Bibliographic Reference

Desmet, K and Parente, S. 2009. 'The Evolution of Markets and the Revolution of Industry: A Quantitative Model of England's Development, 1300-2000'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7290