Working Paper No. 496

Global Income Divergence, Trade and Industrialisation: The Geography of Growth Take-Offs

Published: February, 1998Pages: 45Keywords: Growth Take-Off, Industrial Revolution, Economic Geography, Endogenous Growth, Trade JEL-codes: F01, F43, O19, N13

Global Income Divergence, Trade and Industrialisation: The Geography of Growth Take-Offs Richard E. Baldwin, Philippe Martin and Gianmarco I. P. Ottaviano


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 triggered 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.

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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