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Factor prices and induced technical change in the Industrial Revolution

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  • 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
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    1. Roger Fouquet & Ralph Hippe, 2022. "Twin Transitions of Decarbonisation and Digitalisation: A Historical Perspective on Energy and Information in European Economies," Working Papers 08-22, Association Française de Cliométrie (AFC).

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    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

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