Creator: Goodfriend, Marvin. and McDermott, John H. Series: Economic growth and development Abstract:
We explain how a long period of slow pre-industrial development triggers an Industrial Revolution that leads to modern balanced growth. Development in the preindustrial period is driven by increasing returns to specialization made possible by a growing population. Increasing access to specialized intermediate goods eventually makes fundamental technological innovation possible. Innovation initiates the Industrial Revolution, after which productivity grows endogenously regardless of population growth. Industrialization reconciles the crucial role of population early on with its weak relation to per capita product in developed economies. Faster population growth speeds early development, though if it results from a highly productive primitive technology, the consequences for development are ambiguous.
Keyword: Growth and Industrial Revolution Subject (JEL): N10 - Macroeconomics and monetary economics ; Growth and fluctuations - General, international, or comparative and O11 - Economic development - Macroeconomic analyses of economic development