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Is Industrialization Conducive to Long-Run Prosperity?

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  • Raphael Franck
  • Oded Galor

Abstract

This research explores the long-run effect of industrialization on the process of development. In contrast to conventional wisdom that views industrial development as a catalyst for economic growth, highlighting its persistent effect on economic prosperity, the study establishes that while the adoption of industrial technology was initially conducive to economic development, it has had a detrimental effect on standards of living in the long-run. Exploiting exogenous source of regional variation in the adoption of steam engines during the French industrial revolution, the research establishes that regions which industrialized earlier experienced an increase in literacy rates more swiftly and generated higher income per capita in the subsequent decades. Nevertheless, early industrialization had an adverse effect on income per capita, employment and equality by the turn of the 21st century. This adverse effect reflects neither higher unionization and wage rates nor trade protection, but rather underinvestment in human capital and lower employment in skilled-intensive occupations. These findings suggest that the characteristics that permitted the onset of industrialization, rather than the adoption of industrial technology per se, have been the source of prosperity among the currently developed economies that experienced an early industrialization.

Suggested Citation

  • Raphael Franck & Oded Galor, 2015. "Is Industrialization Conducive to Long-Run Prosperity?," Working Papers 2015-2, Brown University, Department of Economics.
  • Handle: RePEc:bro:econwp:2015-2
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    1. Is industrialization conducive to economic prosperity?
      by nawmsayn in ZeeConomics on 2015-03-08 22:01:43

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    Cited by:

    1. Philips, Robin C. M. & Földvàri, Péter & Van Leeuwen, Bas, 2017. "Drivers of industrialisation: intersectoral evidence from the Low Countries in the nineteenth century," MPRA Paper 83304, University Library of Munich, Germany.
    2. Raphael Franck & Stelios Michalopoulos, 2017. "Emigration during the French Revolution: Consequences in the Short and Longue Durée," Opportunity and Inclusive Growth Institute Working Papers 2, Federal Reserve Bank of Minneapolis.
    3. Dani Rodrik, 2016. "Premature deindustrialization," Journal of Economic Growth, Springer, vol. 21(1), pages 1-33, March.

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    More about this item

    Keywords

    Economic Growth; Industrialization; Steam Engine bounded rationality.;
    All these keywords.

    JEL classification:

    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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