Working Paper: CEPR ID: DP1803
Authors: Richard E. Baldwin; Philippe Martin; Gianmarco I.P. Ottaviano
Abstract: This paper takes a modest step towards formalizing the theoretical interconnections among four post-Industrial-Revolution phenomena ? the industrialization and growth take-off of rich ?northern? nations, massive global income divergence, and rapid trade expansion. Specifically, we present a stages-of-growth model in which the four phenomena are jointly endogenous and are all triggered by a gradual fall in the cost of doing business internationally. Beyond providing a simple framework for exploring the logical connections among these phenomona, the model itself may be of some interest because it is, to our knowledge, the first endogenous growth model to display this Rostovian stages-of-growth feature.
Keywords: growth; takeoff; industrial revolution; economic geography; endogenous growth; trade; development
JEL Codes: F01; F43; N13; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade cost reduction (F14) | industrialization (O14) |
| industrialization (O14) | growth takeoff (O49) |
| growth takeoff (O49) | income divergence (D31) |
| income divergence (D31) | trade expansion (F10) |
| trade cost reduction (F14) | agglomeration of industry in the North (L69) |
| agglomeration of industry in the North (L69) | growth takeoff (O49) |
| trade cost reduction (F14) | income divergence (D31) |
| North's industrialization (N61) | South's stagnation (P27) |
| continued reduction of trade costs (F12) | South's industrialization (O14) |