Long-Run Development from a Global Perspective

• Applicant: Professor Dr. Uwe Sunde
• Subject Area: Economic Theory ; Economic Policy, Applied Economics
• Term: since 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 491578970

Over the past 200 years, the Western world has experienced unprecedented development in all dimensions of life. The economic transition from stagnation to sustained growth brought unparalleled increases in incomes and education levels; the demographic transition led to unseen reductions in mortality and fertility; institutional transitions fundamentally transformed the organization of life. However, not all parts of the world have experienced the same developments. Despite increasing global integration, the differences in income, health, fertility, and institutions across the world are substantial, with some countries still exhibiting living standards resembling those of 19th century Europe. A better understanding of the reasons for these differences constitutes a prerequisite for the design of development policy, yet remains one of the most important open research questions in economics. The goal of this project is to contribute by focusing on the non-monotonic dynamics of long-run development and their implications for international spillovers in technology, health, trade, or cultural factors. Conceptually, this project rests on the hypothesis that, in isolation, all countries follow similar non-monotonic development paths that encompass a phase of quasi-stagnation, a rapid transition in different domains (economic, demographic, political, institutional, and cultural), and a subsequent convergence to a path of sustained development. Differences in comparative development are then the result of delayed transitions along a development trajectory that is determined by the same underlying mechanisms. Understanding the reasons for this delay and the role of global interactions during this process constitute the central objective for this research project. This methodological approach allows for a systematic assessment of the empirical relevance of global interactions, going beyond a mono-causal identification approach. The results will shed new light on the numerous potential deep determinants of long-run development differences across the world that that have been isolated in empirical work. The project reconciles several largely disconnected strands of literature that received revived interest over the past 20 years. The first strand studies the mechanics of long-run economic and demographic development, mostly with a focus on theoretical mechanisms from a single-country perspective. The second, mostly empirical strand has focused on reduced-form evidence regarding the “deep determinants” of development. This literature, which increasingly appreciates the importance of cultural factors and heterogeneity, is conceptually rooted in a cross-sectional perspective that neglects major and non-recurring transitions along a non-linear development trajectory. The third strand on trade and technology diffusion mostly focuses on contemporaneous patterns of comparative development and abstracts from long-run development dynamics and transitions.

• DFG Programme: Reinhart Koselleck Projects