KNOWLEDGE AND GROWTH IN THE VERY LONG RUN

Abstract

This article proposes a theory for the gradual evolution of knowledge diffusion and growth over the very long run. A feedback mechanism between capital accumulation and the ease of knowledge diffusion explains a long epoch of stasis and an epoch of high growth linked by a gradual economic takeoff. The feedback mechanism can explain the Great Divergence, the failure of less developed countries to attract capital from abroad, and the productivity slowdown. An extension toward a two-region world economy shows robustness of results and other interesting interaction between forerunners and followers of the Industrial Revolution.