Stephen L Parente

Stephen L Parente
University of Illinois, Urbana-Champaign | UIUC · Department of Economics

Doctor of Philosophy Economics

About

56
Publications
29,100
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4,209
Citations
Introduction
Stephen L Parente currently works at the Department of Economics, University of Illinois, Urbana-Champaign. Stephen does research in Macroeconomics and Development Economics. His most recent working paper, 'Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence' coauthored with Klaus Desmet and Avner Greif, seeks to understand why England was the first country to industrialize and why the West developed earlier than East.
Additional affiliations
August 1999 - present
University of Illinois, Urbana-Champaign
Position
  • Professor (Associate)
August 1991 - May 1996
Northeastern University
Position
  • Professor (Assistant)

Publications

Publications (56)
Book
Why isn't the whole world as rich as the United States? Conventional views holds that differences in the share of output invested by countries account for this disparity. Not so, say Stephen Parente and Edward Prescott. In Barriers to Riches, Parente and Prescott argue that differences in Total Factor Productivity (TFP) explain this phenomenon. The...
Article
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In this paper we argue that a potentially important mechanism by which modernization leads to democratization is a rise in de facto power as more of the population becomes educated. Analyzing a model in which the polity dictates the pace of modernization through its choice of public education expenditures, we first show that (i) an autocrat must ev...
Article
Borrowing from the demographic dividend literature, this paper examines whether there is a gender bonus, namely an increase in the average living standard associated with increases in female labor force participation (FLFP) rates. Translating a per worker production function into a per capita one, it derives a linear dynamic model, the coefficient...
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This paper considers the possible contribution of spatial competition to the Industrial Revolution and the Great Divergence. Rather than exclusively focusing on the incentives of producers to adopt labor-saving technology, we also consider the incentives of factor suppliers’ organizations such as craft guilds to resist. Once we do so, industrializa...
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Exploiting heterogeneity across Brazilian micro-regions over the 1970–2000 period, this paper examines whether the demographic dividend extends beyond a pure accounting effect. Using a Sys-GMM approach, it finds evidence that changes in age structure have only pure accounting effects after controlling for human capital. Therefore, in the case of Br...
Preprint
Full-text available
This paper puts forth a unified theory of growth and polity in which economic development affects a country's polity and polity affects its development. Education crucially impacts both trajectories, first by moving resources out of the traditional sector and decreasing incomes of the landed class and second, by increasing the de facto power of the...
Article
This paper analyzes the decision of a group of specialized workers to form a guild and block the adoption of a new technology that does not require their specialized input. The theory predicts an inverted-U relation between guilds and market size: for small markets, firm profits are insufficient to cover the fixed cost of adopting the new technolog...
Article
This article proposes a novel mechanism whereby larger markets increase competition and facilitate process innovation. Larger markets, in the sense of more people or more open trade, support a larger variety of goods, resulting in a more crowded product space. This raises the price elasticity of demand and lowers markups. Firms, therefore, become l...
Article
A large literature documents that autocratic regimes have not, on average, outperformed democratic regimes, although they do display greater variance in economic performance. At the same time, no long-lived autocracy currently is rich whereas every long-lived democracy is. This paper puts forth a theory to account for these observations. The theory...
Article
This paper puts forth a unified theory of growth that captures a number of relevant features of countries' transitions from stagnant, predominantly rural economies to vibrant, industrialized economies that have been overlooked by the literature. In our theory, increasing variety of consumer goods and increasing firm size, which are the consequence...
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This 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 loweri...
Article
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...
Chapter
Edward Prescott was awarded the Nobel Prize in Economics in 2004 with Finn Kydland for their contributions to dynamic macroeconomics. Prescott is a member of a small group of economists who, starting in the 1970s, revolutionized macroeconomics by challenging the Keynesian consensus. While he is best known for his research on business cycles and the...
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Max Weber in 1905 claimed that Protestantism, and more specifically Calvinism, facilitated the rise of capitalism. This paper assesses the quantitative plausibility of his hypothesis by introducing religious beliefs into a dynamic general equilibrium model of development and growth. Through counterfactual exercises, the paper investigates whether...
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This paper's hypothesis is that larger markets facilitate the adoption of more productive technology by raising the price elasticity of demand for a firm's product. A larger market, either because of population or free trade, thus implies a larger increase in revenues following the price reduction associated with the introduction of a more producti...
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Why is the adoption of more productive technologies more fiercely re-sisted in some societies than in others? This paper examines the role of market size and free trade in determining whether firms or workers resist the adoption of more advanced technologies. It puts forth a model whereby the price elasticity of demand for each industry's product i...
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This article argues that a natural implication of an innovation-based theory of growth is that slow development facilitates the formation of special interest groups. We demonstrate this in a growth model where innovations take the form of new goods and new production processes, and where factor suppliers in individual industries can organize to for...
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Why is the adoption of more productive technologies more fiercely resisted in some societies than in others? This paper examines the role of market size and free trade in determining whether firms or workers resist the adoption of more advanced technologies. It puts forth a model whereby the price elasticity of demand for each industry's product is...
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What, if anything, can a country today do to catch-up with the industrial leaders? This paper reviews a theory of the evoluti on of international income levels and examines its predictions for catch-up. The main pol icy implication of this theory is that a country will catch-up to the industrial leaders if it eliminates policies that constrain the...
Article
This paper argues that an important reason why Russia's performance and China's performance under capitalism have differed dramatically is that different arrangements governing the determination of prices and work practices evolved during the transition process. In Russia, the arrangement, which conferred monopoly rights to industry groups leftover...
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In most poor countries, large fractions of land, labor, and other productive resources are devoted to producing food for subsistence needs. We show that a model incorporating the “food problem” can provide new and useful insights into the evolution of international income levels. In particular, we find that the food problem can explain why some cou...
Article
Agriculture's share of economic activity is known to vary inversely with a country's level of development. This paper examines whether extensions of the neoclassical growth model can account for some important sectoral patterns observed in a current cross section of countries and in the time series data for currently rich countries. We find that a...
Article
This chapter develops a theory of the evolution of international income levels. In particular, it augments the Hansen–Prescott theory of economic development with the Parente–Prescott theory of relative efficiencies and shows that the unified theory accounts for the evolution of international income levels over the last millennium. The essence of t...
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This paper examines the effect of agricultural development on a country's overall development and growth experience. In most poor countries, large fractions of land, labor, and other productive resources are devoted to producing food for subsistence needs. This "food problem" can delay a country's industrial development for a long period of time, c...
Article
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This essay develops a theory of the evolution of international income levels. In particular, it augments the Hansen-Prescott theory of economic development with the Parente-Prescott theory of relative efficiencies and shows that the unified theory accounts for the evolution of international income levels over the last millennium. The essence of thi...
Article
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This paper puts forth a theory to explainwhy special interest groups are more prevelant in some countries. Its thesis is that uneven industrialization facilitates the formation of special interest groups with monopoly control over factor supplies. An uneven industrial structure is both an artifact of underdevelopment in a country due to a history o...
Article
This paper argues that Russia's performance and China's performance under capitalism have differed dramatically because different arrangements governing the determination of prices and work practices evolved during the transition process. In Russia, the arrangement, which conferred monopoly rights to industry groups left over from socialism, preven...
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This paper examines the recent decentralization of governance in Indonesia and its impact on local infrastructure provision. The decentralization of decisionmaking power to local jurisdictions in Indonesia may have improved the matching of public infrastructures provision with local preferences. However, decentralization has made local public infra...
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. This paper argues that the different experiences of Russia and China under capitalism are the consequence of different arrangements governing the determination of prices and work practices that evolved during the transition process. In Russia, the arrangement, which conferred monopoly rights to industry groups left over from socialism, prevented...
Article
In an attempt to account for the huge observed disparity in international incomes, several recent papers study models in the spirit of Solow (1960) where the adoptions of better technologies require investments in new equipment. This paper continues this line of research. It describes an economy in which firms install more productive machines and s...
Article
We introduce home production into the neoclassical growth model and examine its consequences for development economics. In particular, we study the extent to which one can account for international income differences with differences in policies that distort capital accumulation. In models with home production, such policies not only reduce capital...
Article
Stephen Parente is Assistant Professor at the Department of Economics, University of Illinois, Urbana-Champaign. He specializes in development economics and industrial economics, in particular technology adoption
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Fifteen years have passed since Paul Romer published his seminal paper that launched the field of endogenous growth. Today seems like an appropriate time to reflect back on this field and assess its contribution. My own assessment is that this line of research has not proven useful for understanding the most important question faced by economists t...
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Our thesis is that poor countries are poor because they employ arrangements for which the equilibrium outcomes are characterized by inferior technologies being used, and being used inefficiently. In this paper, we analyze the consequences of one such arrangement. In each industry, the arrangement enables a coalition of factor suppliers to be the mo...
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The authors introduce home production into the neoclassical growth model and examine its consequences for development economics. They focus on how well differences in policies that distort capital accumulation explain international income differences. In models with home production, such policies not only reduce capital accumulation, they also chan...
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We construct a model of economic growth in which firms adopt more advanced technologies. In order to advance its technology, a firm must make an investment. The size of this investment depends on the size of the technology adoption barriers in the firm's country. Assuming a Markov chain for these barriers, we examine the amount of variation and per...
Article
We develop a model in which firms choose which technologies to adopt as well as the timing of such adoptions. In between adoptions, a firm accumulates expertise in its technology which allows it to operate the technology more efficiently. Thus, there is firm-specific learning-by-doing. For certain parameterizations of the model and appropriate init...
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We propose a theory of economic development in which technology adoption and barriers to such adoptions are the focus. The size of these barriers differs across countries and time. The larger these barriers, the greater the investment a firm must make to adopt a more advanced technology. The model is calibrated to the U.S. balanced growth observati...
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The authors propose a theory of economic development in which technology adoption and barriers to such adoptions are the focus. The size of these barriers differs across countries and time. The larger these barriers, the greater the investment a firm must make to adopt a more advanced technology. The model is calibrated to the U.S. balanced growth...
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This study systematically examines the distribution of the wealth of nations and how it has evolved over time. A nation's wealth is measured by its real per-capita gross domestic product. The study documents the following key economic development facts that a theory of economic development must be consistent with: There is a great disparity in weal...
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Technology change is modeled as the result of decisions of individuals and groups of individuals to adopt more advanced technologies. The structure is calibrated to the U.S. and postwar Japan growth experiences. Using this calibrated structure we explore how large the disparity in the effective tax rates on the returns to adopting technologies must...
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By introducing a hierarchic government structure into Grossman and Helpman (1994, 1996), I construct a theoretical model to explain why two developing economies with similar economic fundamentals might have diametrically di¤erent amount of inward FDI as a means of technology adoption. The key mechanism is that the provincial government's attitude t...
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Why did the Industrial Revolution start sometime in the 18th century in England and not earlier and in some other country? This paper argues that the key to the start of the Industrial Revolution was the expansion and integration of markets that preceded it. Due to less regulation, increasing population, and declining trade costs, markets in Englan...
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This paper examines how policy implemented at an economy's agrarian development stage to protect the vested interests of landowners aects a coun- try's subsequent development. We nd such a policy negatively impacts an economy's development path in two ways. First, it delays the formation of industry. Second, it facilitates the formation of industry...
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We compare the distributions of U.S. state per worker output and state per capita personal income, and document their changes over time. Our analysis reveals important differences between the two distributions. Most notably, we find geographical differences are less important in understanding the current disparity of per worker output. We also find...

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Based on the largely overlooked observation that inter-city competition experienced a dramatic increase in England prior to the Industrial Revolution, this paper advances a theory that analyzes the causal effect of spatial competition on the incentives of producers to adopt labor-saving technologies and the incentives of incumbent workers to resist them. By providing historical and empirical evidence of the relation between spatial competition, the decline of guilds and the intensity of innovation in England and China, it argues that the theory is plausible for understanding the timing of industrialization in both countries.