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Globalization and the Industrial Revolution

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  • Ferreira, Pedro Cavalcanti
  • Pessôa, Samuel de Abreu
  • Santos, Marcelo Rodrigues dos

Abstract

This paper argues that trade specialization played an indispensable role in supporting the Industrial Revolution, allowing the economy to shift resources to the manufacture without facing food and raw materials shortage. In our arti cial economy, there are two sectors agriculture and manufacture and the economy is initially closed and under a Malthusian trap. In this economy the industrial revolution entails a transition towards a dynamic Heckscher-Ohlin economy. The model reproduces the main stylized facts of the transition to modern growth and globalization. We show that two-sectors closed-economy models cannot explain the fall in the value of land relative to wages observed in the 19th century and that the transition in this case is much longer than that observed allowing for trade.

Suggested Citation

  • Ferreira, Pedro Cavalcanti & Pessôa, Samuel de Abreu & Santos, Marcelo Rodrigues dos, 2010. "Globalization and the Industrial Revolution," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 708, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:708
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    References listed on IDEAS

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    1. Juan Carlos Conesa & Matthew J. Delventhal & Pau S. Pujolas & Gajendran Raveendranathan, 2019. "Trade and Catching Up to the Industrial Leader," Department of Economics Working Papers 19-04, Stony Brook University, Department of Economics.

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