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on Economic Growth |
| By: | Cervellati, Matteo; Meyerheim, Gerrit; Sunde, Uwe |
| Abstract: | This paper demonstrates that a tractable heterogeneous agent endogenous growth model can quantitatively match the stylized empirical facts of long-run development trajectories of income, life expectancy, and fertility for 86 countries over the past 140 years. A decomposition of comparative development differences into contributions of country-specific ``deep determinants'', accumulation forces during the historical development process, and balanced growth dynamics sheds new light on the mechanisms leading to country-specific differences in development and establishes a link between the largely disparate literatures on endogenous growth, comparative development, and growth accounting. Structural estimation results show that historical accumulation dynamics explain most of today's comparative development patterns. A quantification of the demographic dividend suggests implications for future growth dynamics. |
| JEL: | O10 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20704 |
| By: | Aghion, Philippe; Bergeaud, Antonin; Boppart, Timo; Brouillette, Jean-Félix |
| Abstract: | We propose a model of endogenous economic growth with "weak'' scale effects and diminishing returns to innovation at the micro level. In our model, entrants introduce new technologies through research and incumbents incrementally improve them through development. Over time, further improvement becomes harder such that firms ultimately run out of ideas and exit, paving the way for entrants that discover new technologies with further room for improvement. This turnover gives rise to a continuous stream of (temporary) opportunities for technological improvements that sustain economic growth. In a stationary equilibrium, the growth rate is constant and endogenous to market incentives. |
| Keywords: | Endogenous growth theory; Market size effect; Firm dynamics |
| JEL: | O31 O40 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20761 |
| By: | Chilosi, David; Lecce, Giampaolo; Wallis, Patrick |
| Abstract: | Adam Smith's claim that the division of labour is one of the major engines of economic growth is a foundational concept in economics. Despite this, we lack measures of the scale and growth of Smithian specialisation over the long run. This paper introduces a novel method based on job titles to measure specialisation. We apply this method to document patterns of Smithian specialisation in early modern Britain. National trends in specialisation were closely associated with economic growth. By 1800, the division of labour was over two and a half times as advanced as in the early sixteenth century, with particularly marked changes within English manufacturing, especially in the mechanical subsector, and, to a lesser extent, services. Specialisation was far less advanced in Wales and Scotland. We study several possible explanations for this change with an IV panel analysis. We find that this significant increase in the division of labour was mostly driven by the growth of the domestic market, in line with Adam Smith’s predictions. Intensive specialisation was concentrated in Middlesex and was helped by a supply factor, Marshallian externalities. Finally, we explore the connection between Smithian Growth and the Industrial Revolution. We find that early specialisation did not lead to later industrial success. Like Adam Smith himself, Smithian specialisation did not predict the Industrial Revolution. |
| Keywords: | Specialisation; Britain; Productivity |
| JEL: | N13 O47 J21 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20418 |
| By: | Cervellati, Matteo; Meyerheim, Gerrit; Sunde, Uwe |
| Abstract: | The relation between income and democracy remains debated, empirically and theoretically. We propose a broader perspective that goes beyond a uni-directional and monocausal interpretation of the income-democracy nexus by focusing on the neglected role of the transition from economic stagnation to sustained growth. We illustrate our argument with an integrated model of long-run growth and democratisation that delivers two general insights. First, rather than higher income levels per se, it is the onset of sustained growth that increases the likelihood of democratisation. Intuitively, the faster accumulation of productive factors, such as human capital, reduces conflicts of interest and hence the elite's resistance to democracy. Second, the economic consequences of democracy are amplified when democratisation occurs after the transition to growth. We explore the validity of these novel predictions by revisiting influential empirical studies and exploiting variation in the timing of the transition to sustained growth. Our evidence is consistent with the theoretical predictions, shedding new light on the interpretation of earlier mixed findings. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20721 |
| By: | Broadberry, Stephen; Zhai, Runzuo |
| Abstract: | Recent developments in historical national accounting suggest that the timing of the Great Divergence hinges on the different trends in northwest Europe and the Yangzi Delta region of China. The positive trend of GDP per capita in northwest Europe after 1700 was a continuation of a process that began in the fourteenth century, while the negative trend in the Yangzi Delta continued a pattern of alternating periods of growing and shrinking, but reaching a new lower level. These GDP per capita trends were driven by different paths of innovation. TFP growth was strongly positive in Britain after the Black Death, in the Netherlands during the sixteenth century and again in Britain from the mid-seventeenth century. Although TFP growth was positive in China during the Northern Song dynasty, it was predominantly negative during the Ming and Qing dynasties, in the Yangzi Delta as well as in China as a whole. |
| Keywords: | Technology; Growth accounting |
| JEL: | N10 N30 O10 O57 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20611 |
| By: | Guillaume Blanc (Simon Fraser University) |
| Abstract: | This research shows that secularization accounts for the remarkably early fertility decline in France. The demographic transition, a turning point in history and an essential condition for development, began in France more than a century earlier than in any other country. Why it happened so early is one of the ‘big questions of history’ because it challenges traditional explanations and because of data limitations. Using a novel dataset crowdsourced from publicly available genealogies, I comprehensively document the decline in fertility and its timing with a representative sample of the population. Drawing on a wide range of sources and data, I document an important process of secularization in the eighteenth century and find a strong and robust association with the timing of the transition across regions and individuals. Finally, I explore the drivers of secularization and discuss the persistent impact of the transition on economic growth. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:sfu:sfudps:dp26-11 |
| By: | Greif, Avner; Mokyr, Joel; Tabellini, Guido |
| Abstract: | Why did the industrial revolution occur in Europe and not in China, despite China being well ahead of Europe in terms of economic and technological achievements several centuries earlier? We revisit this long-standing question from a new perspective. We emphasize the importance of the different social organizations that diffused in these two parts of the world in the centuries that preceded the industrial revolution: kin-based organizations in China, vs corporations in Europe. We explain their cultural origins, and discuss how these different organizations shaped the evolution of legal systems, political institutions and human capital accumulation in these two parts of the world. Our main argument is that European corporations played a crucial role in the scientific and technological innovations that ultimately led to the industrial revolution. |
| Keywords: | China; Europe; Standard-setting organizations |
| JEL: | N00 P00 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20514 |
| By: | Aghion, Philippe; Bergeaud, Antonin; Boppart, Timo; Klenow, Peter J.; Li, Huiyu |
| Abstract: | Firm price-cost markups may reflect (a) bigger step sizes from quality innovations that confer significant knowledge spillovers onto other firms, and/or (b) higher process efficiency than competing firms or other factors which bear no obvious knowledge externality. We write down an endogenous growth model with innovation step size and process efficiency as alternative sources of markup heterogeneity. Compared with the laissez-faire equilibrium, the social planner wants to reallocate research towards high step size firms but not high process efficiency firms. We then use price and productivity data across firms in French manufacturing to infer firm step sizes and process efficiency. We find that the planner could achieve faster growth by reallocating research toward high step size firms, and more so if high step size firms could freely license their innovations to high process efficiency firms. |
| Keywords: | Innovations; Creative destruction |
| JEL: | E23 O31 O40 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20654 |
| By: | Liu, Weifeng Larry; Mckibbin, Warwick |
| Abstract: | This paper surveys long-term projections of global GDP per capita and presents our own projections through 2050 using a multi-country-multi-sector general equilibrium model (G-Cubed). Existing studies generally agree that global GDP per capita growth will continue to slow in the coming decades, driven by several global challenges such as rapid population ageing, slower technological progress, weaker capital investment, and stagnating educational attainment. Projections tend to be consistent for advanced economies, but vary considerably for developing regions, highlighting the importance of alternative methodologies and assumptions, as well as inherent long-term uncertainty. While existing studies rely on neoclassical models with an aggregate production sector, the G-Cubed model takes a disaggregated approach to projecting productivity and output that accounts for dynamic interactions between sectors and across economies. Our projections incorporate the impacts of three fundamental factors: productivity growth, population ageing, and climate change. Productivity growth in advanced economies is expected to slow, but artificial intelligence could counteract the decline and serve as an engine for sustained growth. Population ageing in most advanced economies will continue to constrain labour supply, potentially reducing GDP per capita through changes in age structure. Climate change poses challenges to economic growth through multiple channels, with moderate quantitative impacts by mid-century. The extent to which developing regions can boost productivity, leverage demographic advantages, and navigate climate change will depend on policy choices, as well as governance and institutional improvements. Finally, the paper discusses the implications of geopolitical fragmentation, government debt, and public infrastructure on economic growth. |
| JEL: | O40 O33 C53 C68 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20293 |
| By: | Bisin, Alberto; Verdier, Thierry |
| Abstract: | In this chapter we survey recent advances in modeling cultural transmission in the economics literature. We first present the basic canonical model of the evolution of cultural traits in the social sciences. Both Economics and Evolutionary anthropology build on this canonical model but their approaches are conceptually very different. After elucidating these differences, we introduce several recent economic models of cultural transmission which address a rich set of novel and interesting questions in the literature. We present these models as extensions of the canonical framework, organized along theoretical dimensions that we categorize as pertaining to preferences and technology. We finally briefly discuss how cultural evolution represents a fundamental component - alongside institutional change - of recent theoretical work on the political economy of long-run growth. We conclude suggesting interesting areas for future research. |
| JEL: | O10 P16 Z1 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20340 |
| By: | Ignaszak, Marek; Robbins, Daniel; SedláÄ ek, Petr |
| Abstract: | How do R&D incentives affect individual firms and, in turn, shape aggregate growth? We develop a novel empirical framework, grounded in endogenous growth theory, allowing us to measure firms’ responsiveness to R&D incentives and to aggregate such responses. After validating the predictions of our framework using three different micro-datasets, we apply it to Compustat data. We find that (i) ignoring firm heterogeneity severely under-states the aggregate effectiveness of R&D incentives, (ii) per dollar spent on R&D incentives, young (rather than small) firms raise aggregate growth the most and (iii) our results are robust to knowledge spillovers, dynamics and borrowing constraints. |
| Keywords: | R&d policy; Heterogeneous firms; Economic growth |
| JEL: | O31 O38 L1 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20653 |
| By: | Chikis, Craig A.; Kleinman, Benny; Prato, Marta |
| Abstract: | Most U.S. innovation output originates from firms that operate R&D facilities across multiple local markets. We study how this geographic structure influences aggregate innovation and growth, and whether it is socially optimal. First, we develop an endogenous growth model featuring multi-market innovative firms that generate knowledge spillovers to geographically proximate firms. In equilibrium, firms may operate in too few or too many local markets, depending on how sensitive the local spillovers they generate are to their local size. Second, to quantify these effects, we link the model to data on firms’ R&D locations, patents, and citation networks. Using an event-study design, we show that firms’ spatial expansion increases spillovers to other firms and estimate how these spillovers depend on a firm’s local footprint. Our estimates imply that U.S. innovative firms operate in too few markets relative to the social optimum. Third, using quantitative counterfactuals, we find that policies promoting broader spatial scope yield larger welfare gains than standard R&D subsidies. Moreover, unlike R&D subsidies, such policies can also reduce regional inequality. |
| Keywords: | Innovation |
| JEL: | O30 O40 R10 L10 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20408 |
| By: | Jevan Cherniwchan; Juan Moreno-Cruz |
| Abstract: | We study the long-run effects of England’s transition from wood to coal. We develop a Malthusian model in which energy transitions arise endogenously from population growth and alter population dynamics. We derive an estimating equation from our model and take it to county population data spanning 1086 to 1750, exploiting variation in the appropriability of coal created by the Dissolution of the Monasteries to address the endogeneity of when and where transitions occur. Our estimates confirm our model’s predictions: population dynamics change starkly because of the transition, raising the population density of affected counties by roughly 28% by 1750. |
| Keywords: | Energy Transition; Coal; England; Malthus; Growth |
| JEL: | N53 O13 Q32 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:mcm:deptwp:2026-04 |
| By: | Bau, Natalie; Lowes, Sara; Montero, Eduardo |
| Abstract: | Culture shapes how policies are made and how people react to them. This chapter explores how culture and development policy affect each other. First, we provide evidence that cultural mismatch - specifically a mismatch between project manager background and the location of project implementation - is associated with the reduced success of World Bank projects. Second, drawing on historical and ethnographic work, we show that disregarding local cultural norms can undermine well-intentioned development policies. Third, we review economic research demonstrating that cultural practices systematically shape policy effectiveness, often leading to heterogeneous or unintended effects. Fourth, we discuss evidence that policies themselves can reshape cultural norms, sometimes in unexpected ways. Finally, we discuss research on tailoring interventions to the local context and conclude with lessons for future research. |
| Keywords: | Culture |
| JEL: | O1 Z1 N00 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20374 |
| By: | Jia, Ruixue; Kung, James |
| Abstract: | This study reviews the culture and institutions of Confucianism and explores their implications for the trajectory of China’s historical development. We trace the origins and evolution of the core elements of Confucianism and synthesize research on its relationship to clan culture, state institutions, and a broad array of societal values. We also highlight promising but underexplored directions for future research. While Confucianism is often invoked to explain China’s absence from the Industrial Revolution and its lack of democratization, we caution against such retrospective determinism. As a multidimensional and abstract tradition, Confucianism likely allows for varied interpretations and institutional adaptations across time and context. |
| Keywords: | Confucianism; Industrial revolution; Comparative development |
| JEL: | Z10 Z13 O43 P51 N15 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20375 |
| By: | Julien Guigue; Gábor Kátay |
| Abstract: | This paper analyses the dynamic economic impact of changes in governance quality across six key dimensions. Using local projections, we examine whether these changes induce long-term growth effects or result in gradual level shifts in GDP per capita. The findings reveal significant but heterogeneous impacts. While Government Effectiveness, Rule of Law, and Control of Corruption act as drivers of sustained economic growth by permanently increasing long-run growth rates, dimensions like Regulatory Quality and Political Stability lead only to gradual level shifts, moving economic output to a higher permanent level without altering long-term growth rates. Historical analysis of governance changes highlights stark regional differences: Emerging Europe, Post-2004 EU Member States, and non-European developed countries have benefited substantially from governance improvements, whereas Pre-2004 EU Member States, non-EU developed European countries, and regions such as Central and South America, Africa, and Emerging Asia have exhibited comparatively weaker governance dynamics and, consequently, GDP per capita growth. |
| JEL: | C33 E27 H11 O11 O43 O47 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:248 |
| By: | Margarita Gatsou; Uwe Sunde |
| Abstract: | We reconsider some of the central aspects in Adam Smith's work in light of advances in research on long-run development. The main argument is that future orientation - "patience" - represents a key unifying feature in the mechanisms of long-run development. This feature appears to have been part of Smith's argument in various manifestations. We develop the argument along the lines of a simple conceptual framework and discuss the consequences of the influence of life expectancy and institutional quality on the patience embodied in the population for the emergence of development traps. We then illustrate how a feedback from patience to improved life expectancy and institutions can initiate a process of sustained development. |
| Keywords: | Adam Smith, long-run growth, comparative development |
| JEL: | O10 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12764 |
| By: | Desmet, Klaus; Nagy, Dávid Krisztián; Rossi-Hansberg, Esteban |
| Abstract: | This paper studies how human capital shapes the economic geography of development. We develop a model in which the cost of acquiring human capital varies across space, and regions with higher human capital innovate more. Locations are spatially connected through migration and trade. There are localized agglomeration economies, and human-capital-augmenting technology diffuses across space. Using high-resolution data on income and schooling, we quantify and simulate the model at the 1° x 1° resolution for the entire globe. Over the span of two centuries, the model predicts strong persistence in the spatial distribution of development — unlike spatial dynamic models without human capital, which predict convergence. Proportionally lowering the cost of education in sub-Saharan Africa or Central and South Asia raises local outcomes but reduces global welfare, whereas the same policy in Latin America improves global outcomes. An alternative policy equalizing educational costs across sub-Saharan Africa generates relatively worse outcomes, as population reallocates within the region toward less productive areas. Central to these results is the estimated negative correlation between the education costs and local fundamentals, as well as inefficiencies in the spatial allocation due to externalities. |
| Keywords: | Human capital; Geography; Development; Education policy; Global inequality; Dynamic spatial models |
| JEL: | E24 F10 I24 J24 O11 O18 O33 R12 R23 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20671 |
| By: | Fernández, Raquel |
| Abstract: | Culture’s influence on economic outcomes is no longer controversial among economists even if it remains largely ignored in many areas of economics. This paper tackles a different question: why does culture change? The underlying premise adopted here is that culture changes because incentives change, transforming actions and beliefs. An idiosyncratic review of the literature follows that illustrates how the environment (e.g., the prevalence of pathogens or the suitability of land for pastoralism) and historical experiences (e.g., colonization, war, or migration) can affect relationships of power in society and shape people’s beliefs. It then examines the role of new information and ideas (i.e., learning) and finally the role of policies in shaping incentives in changing culture. A second part of the paper reviews work that models the mechanisms of cultural change more explicitly, using quantitative models to examine the interplay between economic incentives and evolving beliefs or preferences and to study the importance of intermediating mechanisms. Given that one of the most profound cultural and economic transformations of the past 150 years concerns gender roles, this theme recurs throughout. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20542 |
| By: | Marianna Epicoco |
| Abstract: | This paper analyzes the relationship between climate change, technological change and affluence. Our expected contribution is to provide a deeper conceptualization of technological change, while taking into account ecological limits, justice and democratic concerns. To this end, we analyze and try to combine evolutionary theories of long-run economic development and limits-to-growth theories, i.e., post-growth and degrowth. We suggest that technological change, even if directed by government policies in the “right directions”, is unlikely to rapidly reduce global emissions. Hence, a significant reduction in global affluence is as necessary as a faster low-carbon transition in order to limit climate change, stay within ecological limits and achieve a more just transition. We also suggest that the lowcarbon transition can be conceptualized as an ecological technological revolution, which can originate a new phase of economic development through major qualitative changes of socio-economic systems in dominant technologies, sectors, firms, institutions and societal values. Finally, we propose that a cap on affluence can be conceptualized as a technology cap, which can accelerate and shape a lowcarbon transition by activating two processes. The first is an endogenous process of co-evolution or cumulative causation between minimalist demand and investment in ecological technologies. The second is a process of debate and democratic definition of an ecological technological paradigm, which can enable socio-institutional actors to act as exogenous unlocking factors. Both these processes, and the forces that shape them, should enable the qualitative evolution of socio-economic systems towards ecology, without necessarily produce their quantitative growth. |
| Keywords: | Climate change; Technological revolutions; Affluence; Long-run economic development; Ecological technological revolution; Technology cap. |
| JEL: | Q50 O33 O11 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2026-24 |
| By: | De La Croix, David; Scebba, Rossana; Zanardello, Chiara |
| Abstract: | While good ideas can emerge anywhere, it takes a community to develop and disseminate them. In premodern Europe (1084-1793), there were approximately 200 universities and 150 academies of sciences, which were home to thousands of scholars and created an extensive network of intellectual exchange. By reconstructing interpersonal connections that were made via institutional affiliations, we demonstrate how the European academic landscape facilitated the diffusion of ideas and led cities to develop: examples include botanic gardens, astronomical observatories, and Protestantism. Counterfactual simulations reveal that both universities and academies played crucial roles, with academies being particularly effective at connecting distant parts of the network. Moreover, we show that the diffusion of ideas through the network is remarkably resilient, even if we remove key regions such as France or the British Isles. In Europe, ideas gain prominence when they are channeled effectively by powerful institutions. |
| JEL: | N33 O33 I23 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20569 |