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Anonymity, Efficiency Wages and Technological Progress

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  • Broadberry, Stephen

    (London School of Economics)

  • Ghosal, Sayantan

    (University of Glasgow)

  • Proto, Eugenio

    (University of Glasgow)

Abstract

Although the Industrial Revolution is often characterized as the culmination of a process of commercialisation, the precise nature of such a link remains unclear. This paper models and analyzes such link: the role of commercialisation in raising efficiency wages as impersonal and anonymous labour market transactions replace personalized customary relations. In the presence of an aggregate capital externality, we show that the resulting shift in relative factor prices leads to higher capital-intensity in the production technology, resulting in a faster rate of technological progress. We provide historical evidence using European data to show that England was among the most urbanized and the highest wage countries at the onset of the Industrial Revolution. We finally calibrate the model to quantify the impact of a higher degree of anonymity on industrial production growth in England between 1300 and 1800.

Suggested Citation

  • Broadberry, Stephen & Ghosal, Sayantan & Proto, Eugenio, 2015. "Anonymity, Efficiency Wages and Technological Progress," IZA Discussion Papers 8791, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8791
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    More about this item

    Keywords

    anonymity; industrial revolution; commercialisation; learning by doing; efficiency wages;
    All these keywords.

    JEL classification:

    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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