Barriers and the transition to modern growth

This paper argues that barriers affect both the beginning date and the subsequent pace of modern growth, and taking into account this fact enriches our knowledge of cross-country income differences. The model matches the observed inverted U-shape of cross-country income differences, which implies that a substantial fraction of current income differences is transitional. Hence, the model requires smaller barriers to account for current income differences relative to models that focus only on steady states. Empirically, I find that differences in the beginning dates of modern growth explain large differences in incomes. r 2004 Elsevier B.V. All rights reserved