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The Danish Growth Miracle

The Danish Growth Miracle. Carl-Johan Dalgaard Inaugural lecture November 5, 2010. Denmark : Limited natural ressources of historical importance ; geographically small; surrounded by powerful nations. .. Prosperity a small miracle ?.

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The Danish Growth Miracle

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  1. The Danish GrowthMiracle Carl-Johan Dalgaard Inaugural lecture November 5, 2010

  2. Denmark: Limitednatural ressources of historicalimportance; geographically small; surrounded by powerful nations. .. Prosperity a small miracle?

  3. Whyare European countriescomparativelyrichtoday? • Proximatereason: Startedgrowingearlierthan all othercountrieson the planet; Denmark (DNK) late 19th century • Howwasthatpossible? DNK adopted the ”Industrial revolution” . How..? • Universal education (early 19th century) was the facilitator • Whythen did DNK adopteducationearlyon? Thequestion.

  4. OUTLINE • The Danish GrowthMiracle: A Theory • Remarksonexternalvalidity of the theory • Implications for the currentpolitical-economicdebate

  5. THE DANISH GROWTH MIRACLE: A THEORY

  6. Historical Denmark today Historical Denmark 5000 BCE

  7. Tabel 2. Top 10: Coast/Area Sources: CIA factbook, World Development Indicators

  8. Initial condition: (Uncommonly) coastal • Travel by sea; hunting and gathering (Tauber, 1981; Enghoff, 1994) • Incremental innovation process: boatbuilding, navigation (e.g., Hale, 1998) • Result: Potential to become a nation propelled by international interaction – trade. This potential wasrealized …

  9. Whywas the trade potential realized? • Limited ressources (need is the mother of nessesity) • Limitedmarket (small country) • Fortunate location: Europe (e.g., Diamond, 1997) • End result: • Geography (Coast/Area) •  International Interaction and Trade

  10. Implications of being a nation propelled by trade? • A need to beopen to new ideas (affects the percievedreturn to knowledgeaccumulation) • Evidence? Archaeology, Anthropology (religion, preChristianity), Technology adoption prior to formal schooling (i.e., before 1500) • End result: TradeCulturalOpennes to new ideas (/highinherentreturn to knowledgeaccumulation)

  11. ”Universal education”; greatidea, but not of Danish origin • Key events: Protestant reformation (e.g., Landes, 1999; Becker/Woessmann, 2009) – 1530 in DNK; Enlightenment (e.g., Easterlin, 1981; Mokyr, 2005) - 1690-1800 • E.g. ”Kirkeordinansen” (1537); ”Forordningen om undervisningspligt på landet” (1739); ” undervisningspligt såvel på land som i by” (1814) • Pre-existinghighinherentreturn to knowledgeaccumulationin DNK Early adoption of universal education in DNK

  12. Theory: • Coastal (limitednaturalresources, location) •  Trade •  Highinherentreturn to knowledgeaccumulation •  Early adoption of universal education •  Technology adoption and take-off

  13. REMARKS ON EXTERNAL VALIDITY

  14. In 1910: Services (in total) make out 45% of GDP. Denmark wasalways a ”service economy”. Today: 70% (New: Public sector)

  15. Cross country data: • Coast/areapredictsculturalvaluation of new ideas (and patents pr capita) • Coast/areapredictsearly (1910) schoolenrolment rates • Coast/areapredicts GDP per capita in 21st area (via HC) • Coast/areapredicts the size of the service sector

  16. IMPLICATIONS FOR THE CURRENT POLITICAL-ECONOMIC DEBATE

  17. Human capitalseems to have beencritical. ”Quantity” in focus in the economicpoliticaleconomicdebate. Perhaps time to considereducational institutions though (generalists vs specialists) • Technology adoption has alwaysbeencritical; not invention per se. In the economic-policialdebate all focusseems to beon the latter however • Services: historicallycritical, contemporarilycritical. Not in focus in economic-politicaldebate, whichfocuseson Industry

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