Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 496: Global Income Divergence, Trade and Industrialisation: The Geography of Growth Take-Offs

Richard E. Baldwin, Philippe Martin and Gianmarco I.P. Ottaviano ()
Additional contact information
Richard E. Baldwin: Graduate Institute of International Studies, Geneva, Postal: 11 A Ave. de la Paix, CH-1202 Geneva Switzerland
Philippe Martin: Graduate Institute of International Studies, Geneva, and CERAS, Paris, Postal: 11A Ave. de la Paix, CH-1202 Geneva Switzerland
Gianmarco I.P. Ottaviano: University of Bologna and Louvain-la-Neuve

Abstract: This paper takes a 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 all are trigged by a gradual fall in the cost of doing business internationally. In the first stage, while trade costs are high, industry is dispersed and growth is low. In the second stage, the north industrializes rapidly, growth takes off and the south diverges. In the third stage, high growth becomes self sustaining. The model shows under which conditions, in a fourth stage, the south can quickly industrialize and converge.

Keywords: Growth Take-Off; Industrial Revolution; Economic Geography; Endogenous Growth; Trade and Development

JEL-codes: F01; F43; N13; O19

45 pages, February 1, 1998

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