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The Evolution Of Markets And The Revolution Of Industry: A Unified Theory Of Growth

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Executive Summary

This paper puts forth a unified theory of growth that captures a number of relevant features of countries' transitions from stagnant, predominantly rural economies to vibrant, industrialized economies that have been overlooked by the literature. In the authors' theory, increasing variety of consumer goods and increasing firm size, which are the consequence of a gradual expansion in the market, sow the seeds for process innovation and an economy's take-off. They 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 take-off.

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