Innovation and the great divergence

Abstract

Recent historical national accounting data show that the timing of the Great Divergence hinges on the different trends in north‐west Europe and the Yangzi Delta region of China. Although north‐west Europe only pulled ahead of the Yangzi Delta after 1700, both the positive trend of GDP per capita in north‐west Europe after 1700 and the negative trend in the Yangzi Delta were continuations of a process that began in the fourteenth century, driven by different paths of innovation. We provide an analytic narrative of the Great Divergence based on the proximate sources of growth and the fundamental sources of innovation.