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14 - Underlying Sources of Growth: First and Second Nature Geography

from Part II - Factors Governing Differential Outcomes in the Global Economy

Published online by Cambridge University Press:  03 June 2021

By
Paul Caruana-Galizia ,
Tomoko Hashino  and
Max-Stephan Schulze
Edited by
Stephen Broadberry  and
Kyoji Fukao
Stephen Broadberry
Affiliation:
University of Oxford
Kyoji Fukao
Affiliation:
Hitotsubashi University, Tokyo
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Summary

This chapter considers to what extent ‘geography’, broadly conceived, mattered for economic growth across the globe. First, it sets out the pattern of comparative aggregate growth between 1700 and 1870 and documents the east to west shift in the global distribution of economic activity. The next section surveys the comparative evidence on key first nature (or physical) geography characteristics that are potentially critical for long run economic development. This is followed by a discussion of second nature geography (the ’geography of interactions between economic agents’) and a quantitative assessment of the extent to which first nature characteristics, second nature geographical forces and institutional quality can account for income differentials across a sample of major economies in America, Asia, and Europe. Finally, a case study on shifting comparative advantage in the textile industry illustrates the outcomes of technical change within a changing global economic geography. The chapter concludes that changes in trade costs, agglomeration economies and differential access to markets with associated productivity gains probably played a major role in moving the economic centre of gravity. The West became absolutely and relatively richer than the East, not only because of better institutions but also because of more favourable geographies.

Keywords

economic growthgeographyGreat Divergenceinstitutionsmarket accessmarket integrationspatial distribution of economic activitytradeurbanization
Type
Chapter
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The Cambridge Economic History of the Modern World , pp. 339 - 368
Publisher: Cambridge University Press
Print publication year: 2021

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