DP5490 Trade and the Great Divergence: The Family Connection

Author(s): Oded Galor, Andrew Mountford
Publication Date: February 2006
Keyword(s): demographic transition, growth, human capital, industrial revolution, international trade
JEL(s): F11, F43, J10, N30, O40
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5490

This research argues that the rapid expansion of international trade in the second phase of the industrial revolution has played a major role in the timing of demographic transitions across countries and has thereby been a significant determinant of the distribution of world population and a prime cause of the 'Great Divergence' in income per capita across countries in the last two centuries. The analysis suggests that international trade had an asymmetrical effect on the evolution of industrial and non-industrial economies. While in the industrial nations the gains from trade were directed primarily towards investment in education and growth in output per capita, a significant portion of the gains from trade in non-industrial nations was channelled towards population growth.