The evolution of markets and the revolution of industry : a quantitative model of England’s development, 1300-2000

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.European Community's Seventh Framework ProgramFinancial aid from the European Commission (EFIGE Grant 225343 and HI-POD Grant 225551), the Comunidad de Madrid (PROCIUDAD-CM), and the Spanish Ministry of Science (ECO2008-01300) is acknowledged

The Evolution of Markets and the Revolution of Industry: A Unified Theory of Growth

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 our 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. 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 take-off.Uni�ed Growth Theory, Industrial Revolution, Innovation, Competition, Market Revolution

Bigger is better: Market size, demand elasticity and innovation

This paper proposes a novel mechanism whereby larger markets increase competition and facilitate process innovation. Larger markets, in the sense of more people or more open trade, support a larger variety of goods, resulting in a more crowded product space. This raises the price elasticity of demand and lowers mark-ups. Firms, therefore, become larger to break even. This facilitates process innovation as larger firms can amortize R&D costs over more goods. We demonstrate this mechanism in a standard model of process and product innovation. In doing so, we question some important results in the new trade and endogenous growth literatures.trade; population; price elasticity; competition; innovation; firm-size; scale effects; Dixit-Stiglitz; Hotelling

Bigger is better : market size, demand elasticity and innovation.

This article proposes a novel mechanism whereby larger markets increase competition and facilitate process innovation. Larger markets, in the sense of more people or more open trade, support a larger variety of goods, resulting in a more crowded product space. This raises the price elasticity of demand and lowers markups. Firms, therefore, become larger to break even. This facilitates process innovation, as larger firms can amortize R&D costs over more goods. We demonstrate this mechanism in a standard model of process and product innovation. In doing so, we question some important results in the new trade and endogenous growth literatures

Market Size, Trade, and the Resistance to the Adoption of Better Technology

Why is the adoption of more productive technologies more fiercely resisted in some societies than in others? This paper examines the role of market size and free trade in determining whether firms or workers resist the adoption of more advanced technologies. It puts forth a model whereby the price elasticity of demand for each industry's product is an increasing function of the economy's population size. A more elastic demand lowers the resistance to technology adoption because the drop in the price of the industry's output that follows the adoption of a cost-saving technology is associated with a larger increase in industry's revenue. We demonstrate this mechanism numerically and provide empirical support for this theory.Technology Adoption, Resistance, Trade, Ideal Varieties

Technology Adoption and Growth

Technology change is modeled as the result of decisions of individuals and groups of individuals to adopt more advanced technologies. The structure is calibrated to the U.S. and postwar Japan growth experiences. Using this calibrated structure we explore how large the disparity in the effective tax rates on the returns to adopting technologies must be to account for the huge observed disparity in per capita income across countries. We find that this disparity is not implausibly large.

A unified theory of the evolution of international income levels

This essay develops a theory of the evolution of international income levels. In particular, it augments the Hansen-Prescott theory of economic development with the Parente-Prescott theory of relative efficiencies and shows that the unified theory accounts for the evolution of international income levels over the last millennium. The essence of this unified theory is that a country starts to experience sustained increases in its living standard when production efficiency reaches a critical point. Countries reach this critical level of efficiency at different dates not because they have access to different stocks of knowledge, but rather because they differ in the amount of society-imposed constraints on the technology choices of their citizenry.Income

Fixation of theoretical ambiguities in the improved fits to xF3xF_3 CCFR data at the next-to-next-to-leading order and beyond

Using the results for the NNLO QCD corrections to anomalous dimensions of odd $xF_3$ Mellin moments and N$^3$LO corrections to their coefficient functions we improve our previous analysis of the CCFR'97 data for $xF_3$. The possibility of extracting from the fits of $1/Q^2$-corrections is analysed using three independent models,including infrared renormalon one. Theoretical quetion of applicability of the renormalon-type inspired large-$\beta_0$ approximation for estimating corrections to the coefficient functions of odd $xF_3$ and even non-singlet $F_2$ moments are considered. The comparison with [1/1] Pad\'e estimates is given. The obtained NLO and NNLO values of $\alpha_s(M_Z)$ are supporting the results of our less definite previous analysis and are in agreement with the world average value $\alpha_s(M_Z)\approx 0.118$. We also present first N$^3$LO extraction of $\alpha_s(M_Z)$. The interplay between higher-order perturbative QCD corrections and $1/Q^2$-terms is demonstrated. The results of our studies are compared with those obtained recently using the NNLO model of the kernel of DGLAP equation and with the results of the NNLO fits to CCFR'97 $xF_3$ data, performed by the Bernstein polynomial technique.Comment: The errors in the coefficients $C_{F_3}^{(3)}(n)$ of ($\alpha_s/4\pi)^3 QCD corrections to the Mellin moments of xF_3 structure function were detected. The application of the corrected results in the fits resulted in decrease of N$^3$LO values of$\Lambda_{\bar{MS}}^{(4)}$ in Tables 6,11,12 by 3 MeV only (details are in the enclosed Erratum (in press)