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Trade, Knowledge, and the Industrial Revolution

  • Kevin H. O'Rourke
  • Ahmed S. Rahman
  • Alan M. Taylor

Technological change was unskilled-labor-biased during the early Industrial Revolution of the late eighteenth and early nineteenth centuries, but is skill-biased today. This fact is not embedded in extant unified growth models. We develop a model of the transition to sustained economic growth which can endogenously account for both these facts, by allowing the factor bias of technological innovations to reflect the profit-maximising decisions of innovators. Endowments dictated that the initial stages of the Industrial Revolution be unskilled-labor biased. The transition to skill-biased technological change was due to a growth in "Baconian knowledge" and international trade. Simulations show that the model does a good job of tracking reality, at least until the mass education reforms of the late nineteenth century.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13057.

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Date of creation: Apr 2007
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Handle: RePEc:nbr:nberwo:13057
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