For two decades, the consensus explanation of the British Industrial Revolution has placed technological change and the supply side at center stage, affording little or no role for demand or overseas trade. Recently, alternative explanations have placed an emphasis on the importance of trade with New World colonies, and the expanded supply of raw cotton it provided. We test both hypotheses using calibrated general equilibrium models of the British economy and the rest of the world for 1760 and 1850. Neither claim is supported. Trade was vital for the progress of the industrial revolution; but it was trade with the rest of the world, not the American colonies, that allowed Britain to export its rapidly expanding textile output and achieve growth through extreme specialization in response to shifting comparative advantage.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
14077.
Length: Date of creation: Jun 2008 Date of revision: Handle: RePEc:nbr:nberwo:14077
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Find related papers by JEL classification: F11 - International Economics - - Trade - - - Neoclassical Models of Trade F14 - International Economics - - Trade - - - Country and Industry Studies of Trade F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies N10 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - General, International, or Comparative N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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