Desmet, KlausParente, Stephen L.2009-07-152009-07-152009-04https://hdl.handle.net/10016/4808This paper argues that an economy's transition from Malthusian stagnation to modern growth requires markets to reach a critical size, and competition to reach a critical level of intensity. By allowing an economy to produce a greater variety of goods, a larger market makes goods more substitutable, raising the price elasticity of demand, and lowering mark-ups. Firms must then become larger to break even, which facilitates amortizing the fixed costs of innovation. We demonstrate our theory in a dynamic general equilibrium model calibrated to England's long-run development and explore how various factors affect the timing of takeoff.application/pdfengAtribución-NoComercial-SinDerivadas 3.0 EspañaUnified growth theoryIndustrial revolutionInnovationCompetitionMarket revolutionworking paperO14O33O41N33Economíaopen access