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Flowers of Evil? Industrialization and Long Run Development

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  • Raphael Franck
  • Oded Galor

Abstract

This research explores the effect of industrialization on the process of development. In contrast to conventional wisdom that views industrial development as a catalyst for economic growth, the study establishes that while the adoption of industrial technology was conducive to economic development in the short-run, it has detrimental effects on the standard of living in the long-run. Exploiting exogenous geographic and climatic sources of variation in the diffusion and adoption of steam engines across French departments during the early phases of industrialization, the research establishes that intensive industrialization in the middle of the 19th century increased income per capita in the subsequent decades but diminished it by the turn of the 21st century. The analysis further suggests that the adverse effect of earlier industrialization on long-run prosperity can be attributed to the negative impact of the adoption of unskilled-intensive technologies in the early stages of industrialization on the long-run level of human capital and thus on the incentive to adopt skill-intensive technologies in the contemporary era. Preferences and educational choices of second generation migrants within France indicate that industrialization has triggered a dual techno-cultural lock-in characterized by a reinforcing interaction between technological inertia, reflected by the persistence predominance of low-skilled-intensive industries, and cultural inertia, in the form of a lower predisposition towards investment in human capital. 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. Thus, developing economies may benefit from the allocation of resources towards human capital formation and skilled intensive sectors rather than toward the promotion of traditional unskilled-intensive industrial sectors.

Suggested Citation

  • Raphael Franck & Oded Galor, 2018. "Flowers of Evil? Industrialization and Long Run Development," Working Papers 2018-7, Brown University, Department of Economics.
  • Handle: RePEc:bro:econwp:2018-7
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    Cited by:

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    3. Björn Brey, 2021. "The long-run gains from the early adoption of electricity," Discussion Papers 2021-05, University of Nottingham, GEP.
    4. Christoph Eder, 2022. "Missing Men: Second World War Casualties and Structural Change," Economica, London School of Economics and Political Science, vol. 89(354), pages 437-460, April.
    5. Berbée, Paul & Braun, Sebastian Till & Franke, Richard, 2022. "Reversing Fortunes of German Regions, 1926–2019: Boon and Bane of Early Industrialization?," IZA Discussion Papers 15463, Institute of Labor Economics (IZA).
    6. Muhammad Fikry Hadi & Muhammad Hidayat & Dwi Widiarsih & Neng Murialti, 2021. "The Role of Electricity and Energy Consumption Influences Industrial Development between Regions in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 403-408.
    7. Elena Esposito & Scott F. Abramson, 2021. "The European coal curse," Journal of Economic Growth, Springer, vol. 26(1), pages 77-112, March.

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    More about this item

    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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