NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Evidence on Growth, Increasing Returns and the Extent of the Market

Alberto F. Ades, Edward L. Glaeser

NBER Working Paper No. 4714
Issued in April 1994
NBER Program(s):   EFG

We examine two sets of economies, (19th century U.S. states and 20th century less developed countries) where growth rates are positively correlated with initial levels of development to document how these dynamic increasing returns operate. We find that open economies do not display a positive connection between initial levels and later growth; instead, closed economies do display this positive correlation (i.e. divergence). This evidence suggests that increasing returns operate by expanding the extent of the market (as in the big push theories of Murphy, Shleifer and Vishny (1989)). For U.S. states, we also find that larger markets enhance growth by increasing the division of labor. Among LDCs, while more diversified production increases growth, diversification is negatively associated with openness for the poorest economies (as in the quality ladder theories of Boldrin and Scheinkman (1988), Young (1991) and Stokey (1991)). However, and despite the negative effect that openness has on the diversity of production and, thus, on growth, we find that openness still substantially increases growth for these poorer economies.

download in pdf format
   (555 K)

email paper

This paper is available as PDF (555 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Quarterly Journal of Economics, Vol. 114, no. 3 (August 1999): 1025-1045.

Users who downloaded this paper also downloaded these:
Ades and Glaeser w4715 Trade and Circuses: Explaining Urban Giants
Wacziarg and Horn Welch w10152 Trade Liberalization and Growth: New Evidence
Rodriguez and Rodrik Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence
Davis and Weinstein w8518 Market Size, Linkages, and Productivity: A Study of Japanese Regions
Alesina and Spolaore w5050 On the Number and Size of Nations
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us