IDEAS home Printed from https://ideas.repec.org/p/cgs/wpaper/92.html
   My bibliography  Save this paper

Factor prices and induced technical change in the Industrial Revolution

Author

Listed:
  • Ravshonbek Otojanov and Roger Fouquet

Abstract

Allen (2009) has argued that the divergence in factor prices determined the direction of technical change that altered the course of economic growth in Britain. Using historical data for the 1700 – 1914 period, this paper derives and analyses the nature and direction of technical change. The results show that technical change was biased during the Industrial Revolution and that the bias stemmed from the divergence in the cost of labour and energy. In particular, labour saving responded strongly to the acceleration in wage growth in the 1850-1914 period. Overall, technical change was labour-saving, energy-using and hence capital-deepening. Moreover, the evidence shows that the expansion of effective energy supply allowed British economy to sustain output growth in the First Industrial Revolution era. Labour-saving innovations were particularly crucial in the Second Industrial Revolution.

Suggested Citation

  • Ravshonbek Otojanov and Roger Fouquet, 2018. "Factor prices and induced technical change in the Industrial Revolution," Working Papers 92, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  • Handle: RePEc:cgs:wpaper:92
    as

    Download full text from publisher

    File URL: http://webspace.qmul.ac.uk/pmartins/CGRWP92.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hassler, John & Krusell, Per & Olovsson, Conny, 2012. "Energy-Saving Technical Change," CEPR Discussion Papers 9177, C.E.P.R. Discussion Papers.
    2. Allen, Robert C., 2012. "Backward into the future: The shift to coal and implications for the next energy transition," Energy Policy, Elsevier, vol. 50(C), pages 17-23.
    3. 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.
    4. Roger Fouquet, 2011. "Divergences in Long-Run Trends in the Prices of Energy and Energy Services," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 196-218, Summer.
    5. Morgan Kelly & Joel Mokyr & Cormac Ó Gráda, 2014. "Precocious Albion: A New Interpretation of the British Industrial Revolution," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 363-389, August.
    6. de Pleijt, Alexandra M., 2015. "Human capital and long run economic growth : Evidence from the stock of human capital in England, 1300-1900," CAGE Online Working Paper Series 229, Competitive Advantage in the Global Economy (CAGE).
    7. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
    8. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
    9. Devine, Warren D., 1983. "From Shafts to Wires: Historical Perspective on Electrification," The Journal of Economic History, Cambridge University Press, vol. 43(2), pages 347-372, June.
    10. Kander, Astrid & Stern, David I., 2014. "Economic growth and the transition from traditional to modern energy in Sweden," Energy Economics, Elsevier, vol. 46(C), pages 56-65.
    11. Broadberry,Stephen & Campbell,Bruce M. S. & Klein,Alexander & Overton,Mark & van Leeuwen,Bas, 2015. "British Economic Growth, 1270–1870," Cambridge Books, Cambridge University Press, number 9781107070783.
    12. Roger Fouquet & Peter J.G. Pearson, 2012. "The Long Run Demand for Lighting:Elasticities and Rebound Effects in Different Phases of Economic Development," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    13. Roger Fouquet, 2014. "Editor's Choice Long-Run Demand for Energy Services: Income and Price Elasticities over Two Hundred Years," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(2), pages 186-207.
    14. Hans-Joachim Voth, 2003. "Living Standards During the Industrial Revolution: An Economist's Guide," American Economic Review, American Economic Association, vol. 93(2), pages 221-226, May.
    15. 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(3), pages 819-841, September.
    16. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
    17. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
    18. Broadberry, Stephen & Campbell, Bruce M.S. & van Leeuwen, Bas, 2013. "When did Britain industrialise? The sectoral distribution of the labour force and labour productivity in Britain, 1381–1851," Explorations in Economic History, Elsevier, vol. 50(1), pages 16-27.
    19. Fouquet, Roger, 2010. "The slow search for solutions: Lessons from historical energy transitions by sector and service," Energy Policy, Elsevier, vol. 38(11), pages 6586-6596, November.
    20. Allen,Robert C., 2009. "The British Industrial Revolution in Global Perspective," Cambridge Books, Cambridge University Press, number 9780521868273, May.
    21. Allen, Robert C., 2001. "The Great Divergence in European Wages and Prices from the Middle Ages to the First World War," Explorations in Economic History, Elsevier, vol. 38(4), pages 411-447, October.
    22. Wrigley,E. A., 2010. "Energy and the English Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521766937.
    23. Clark, Gregory & Jacks, David, 2007. "Coal and the Industrial Revolution, 1700–1869," European Review of Economic History, Cambridge University Press, vol. 11(1), pages 39-72, April.
    24. Jakob Madsen & James Ang & Rajabrata Banerjee, 2010. "Four centuries of British economic growth: the roles of technology and population," Journal of Economic Growth, Springer, vol. 15(4), pages 263-290, December.
    25. Wrigley,E. A., 2010. "Energy and the English Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521131858.
    26. Roger Fouquet & Peter J. G. Pearson, 1998. "A Thousand Years of Energy Use in the United Kingdom," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-41.
    27. Astrid Kander & Paolo Malanima & Paul Warde, 2013. "Power to the People: Energy in Europe over the Last Five Centuries," Economics Books, Princeton University Press, edition 1, number 10138, April.
    28. Petra Moser, 2012. "Innovation without Patents: Evidence from World's Fairs," Journal of Law and Economics, University of Chicago Press, vol. 55(1), pages 43-74.
    29. Fouquet, Roger, 2015. "The allocation of energy resources in the very long run," LSE Research Online Documents on Economics 62367, London School of Economics and Political Science, LSE Library.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kander, Astrid & Stern, David I., 2014. "Economic growth and the transition from traditional to modern energy in Sweden," Energy Economics, Elsevier, vol. 46(C), pages 56-65.
    2. Emmanuel Bovari & Victor Court, 2019. "Energy, knowledge, and demo-economic development in the long run: a unified growth model," Working Papers hal-01698755, HAL.
    3. Fouquet, Roger, 2016. "Lessons from energy history for climate policy: technological change, demand and economic development," LSE Research Online Documents on Economics 67785, London School of Economics and Political Science, LSE Library.
    4. Agovino, Massimiliano & Bartoletto, Silvana & Garofalo, Antonio, 2019. "Modelling the relationship between energy intensity and GDP for European countries: An historical perspective (1800–2000)," Energy Economics, Elsevier, vol. 82(C), pages 114-134.
    5. van de Ven, Dirk Jan & Fouquet, Roger, 2017. "Historical energy price shocks and their changing effects on the economy," Energy Economics, Elsevier, vol. 62(C), pages 204-216.
    6. Broadberry, Stephen & Ghosal, Sayantan & Proto, Eugenio, 2017. "Anonymity, efficiency wages and technological progress," Journal of Development Economics, Elsevier, vol. 127(C), pages 379-394.
    7. Sofia Teives Henriques & Paul Sharp, 2016. "The Danish agricultural revolution in an energy perspective: a case of development with few domestic energy sources," Economic History Review, Economic History Society, vol. 69(3), pages 844-869, August.
    8. Christopher Kennedy, 2020. "The energy embodied in the first and second industrial revolutions," Journal of Industrial Ecology, Yale University, vol. 24(4), pages 887-898, August.
    9. Tepper, Alexander & Borowiecki, Karol Jan, 2015. "Accounting for breakout in Britain: The industrial revolution through a Malthusian lens," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 219-233.
    10. Roger Fouquet, 2015. "Lessons from energy history for climate policy," GRI Working Papers 209, Grantham Research Institute on Climate Change and the Environment.
    11. Cormac Ó Gráda, 2016. "Did Science Cause the Industrial Revolution?," Journal of Economic Literature, American Economic Association, vol. 54(1), pages 224-239, March.
    12. Gars, Johan & Olovsson, Conny, 2019. "Fuel for economic growth?," Journal of Economic Theory, Elsevier, vol. 184(C).
    13. Kevin H. O'Rourke & Ahmed S. Rahman & Alan M. Taylor, 2007. "Trade, Knowledge and the Industrial Revolution," Development Working Papers 230, Centro Studi Luca d'Agliano, University of Milano.
    14. Broadberry, Stephen & Custodis, Johann & Gupta, Bishnupriya, 2015. "India and the great divergence: An Anglo-Indian comparison of GDP per capita, 1600–1871," Explorations in Economic History, Elsevier, vol. 55(C), pages 58-75.
    15. David I. Stern and Astrid Kander, 2012. "The Role of Energy in the Industrial Revolution and Modern Economic Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    16. Alex Trew, 2014. "Spatial Takeoff in the First Industrial Revolution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 707-725, October.
    17. Fouquet, Roger, 2012. "The demand for environmental quality in driving transitions to low-polluting energy sources," Energy Policy, Elsevier, vol. 50(C), pages 138-149.
    18. B. Zorina Khan, 2018. "Human capital, knowledge and economic development: evidence from the British Industrial Revolution, 1750–1930," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 12(2), pages 313-341, May.
    19. Fouquet, Roger, 2014. "Long run demand for energy services: income and price elasticities over two hundred years," LSE Research Online Documents on Economics 59070, London School of Economics and Political Science, LSE Library.
    20. Andersson, David & Karadja, Mounir & Prawitz, Erik, 2020. "Mass Migration and Technological Change," SocArXiv 74ub8, Center for Open Science.

    More about this item

    Keywords

    Industrial Revolution; Factor-Saving Technical Change; Induced Technical Change; Productivity; Innovation.;
    All these keywords.

    JEL classification:

    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cgs:wpaper:92. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/cgqmwuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Pedro S. Martins (email available below). General contact details of provider: https://edirc.repec.org/data/cgqmwuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.