The Great Divergence Revisited: Industrialization, Inequality and Political Conflict in the Unified Growth Model

Dmitry Veselov and Alexander Yarkin

HSE Working papers from National Research University Higher School of Economics

Abstract: This paper studies the impact of inequality in capital and land distribution on the pace of industrialization, thereby explaining the role of wealth inequality in the Great Divergence phenomenon. We build a two-sector unified growth model, in which the outcome of public policy contest between the supporters and opponents of modern sector development determines the pace of industrialization. The distribution of wealth affects the incentives of agents to invest in political conflict, and hence influences the probability of pro-growth policies. We show that while higher inequality in land distribution hampers modern sector development, higher inequality in capital within landless agents is growth enhancing. The strength of the latter effect increases with the amount of accumulated capital. The model also captures the hump-shaped path of conflict intensity observed throughout the industrialization phase. We present several historical narratives that support these results

Keywords: unified growth; public policy contest; endogenous institutions; industrialization; inequality (search for similar items in EconPapers)
JEL-codes: D72 D74 N10 O14 O41 O43 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015
New Economics Papers: this item is included in nep-gro, nep-his and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in WP BRP Series: Economics / EC, December 2015, pages 1-41

Downloads: (external link)
http://www.hse.ru/data/2016/01/18/1135136840/118EC2015.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:118/ec/2015

Access Statistics for this paper

More papers in HSE Working papers from National Research University Higher School of Economics
Bibliographic data for series maintained by Shamil Abdulaev () and Shamil Abdulaev ().