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Was technological change in the early Industrial Revolution Schumpeterian? Evidence of cotton textile profitability

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  • Harley, C. Knick

Abstract

Price and profit data between the 1770s and the 1820s from accounting records of three Lancashire cotton firms help to illumine the nature of the economic processes at work in early industrialization. Many historians have seen the Industrial Revolution as a Schumpeterian process in which discontinuous technological change led by the mechanized factories of the cotton industry created large profits for innovators that persisted in succeeding decades while technology slowly diffused. In this view imperfect capital markets limited the use of the new technology, keeping profits high. Reinvestment of these profits gradually financed expansion of innovating firms. The new technology dominated only after a long diffusion process. The evidence here, however, supports a more equilibrium view in which the industry expanded rapidly and prices fell in response to technological change. Expansion of the industry led to dramatic declines in the prices of cotton goods as early as the 1780s. There is no evidence of super-normal profits thereafter. Prices continued to fall and output expand thereafter as cost-reducing technological change continued.

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Bibliographic Info

Article provided by Elsevier in its journal Explorations in Economic History.

Volume (Year): 49 (2012)
Issue (Month): 4 ()
Pages: 516-527

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Handle: RePEc:eee:exehis:v:49:y:2012:i:4:p:516-527

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Web page: http://www.elsevier.com/locate/inca/622830

Related research

Keywords: Industrial Revolution; Schumpeterian growth; Cotton textiles; Prices; Profits;

References

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  1. Gregory Clark, 2009. "The Macroeconomic Aggregates for England, 1209-2008," Working Papers 919, University of California, Davis, Department of Economics.
  2. Harley, C. Knick & Crafts, N.F.R., 2000. "Simulating the Two Views of the British Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 60(03), pages 819-841, September.
  3. C. Knick Harley, 2010. "Prices and Profits in Cotton Textiles During the Industrial Revolution," Economics Series Working Papers Number 81, University of Oxford, Department of Economics.
  4. N. F. R. Crafts & C. K. Harley, 1992. "Output growth and the British industrial revolution: a restatement of the Crafts-Harley view," Economic History Review, Economic History Society, vol. 45(4), pages 703-730, November.
  5. Pollard, Sidney, 1964. "Fixed Capital in the Industrial Revolution in Britain," The Journal of Economic History, Cambridge University Press, vol. 24(03), pages 299-314, September.
  6. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
  7. Allen, Robert C., 2009. "Engels' pause: Technical change, capital accumulation, and inequality in the british industrial revolution," Explorations in Economic History, Elsevier, vol. 46(4), pages 418-435, October.
  8. Lyons, John S., 1985. "Vertical Integration in the British Cotton Industry, 1825–1850: a Revision," The Journal of Economic History, Cambridge University Press, vol. 45(02), pages 419-425, June.
  9. Mokyr, Joel, 1976. "Growing-up and the industrial revolution in Europe," Explorations in Economic History, Elsevier, vol. 13(4), pages 371-396, November.
  10. C. Knick Harley, 1998. "Cotton Textile Prices and the Industrial Revolution," Economic History Review, Economic History Society, vol. 51(1), pages 49-83, 02.
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