The Evolution of Markets and the Revolution of Industry: a Uni…ed Theory of Growth

This paper puts forth a uni…ed 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 …rm size, which are the consequence of a gradual expansion in the market, sow the seeds for process innovation and an economy's take-o¤. We demonstrate this mechanism in a dynamic general equilibrium model calibrated to England's long-run development , and explore how various factors a¤ected the timing of its take-o¤.

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