We ask whether barriers to entry are a quantitatively important reason for the income gap between developing countries and the United States. We develop a tractable general equilibrium model that captures the effects of barriers to entry and the other main distortions typically considered in the development literature. We carry our model to the data and ask it to match the main development facts from the Penn World Table. We find that this requires large barriers to entry in developing countries, which account for about half of the income gap with the United States.

We return to two questions concerning the 19th century U.S. transportation revolution. First, to what extent were transportation improvements responsible for the large changes in the regional distribution of population in the United States and, within regions, for the changes in industry structure? Second, how important were transportation improvements for welfare gains? We find that transport improvements were the key factor driving where people lived and what industry they worked in. We also find that transport improvements were important for welfare gains: Gains over 1840–1860 would have been only half as large if there had been no transportation improvements.

We study a two-sector version of the neoclassical growth model with coalitions of factor suppliers in the capital producing sectors. We show that if the coalitions have monopoly rights, then they block the adoption of the efficient technology. We also show that blocking leads to a decrease in the productivity of each capital producing sector and to an increase in the relative price of capital; as a result the capital stock and the production fall in each sector. We finally show that the implied fall in the level of per-capita income can be large quantitatively.