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Directed technical change and the British Industrial Revolution


  • David I. Stern
  • John C. V. Pezzey
  • Yingying Lu


We build a directed technical change model where one intermediate goods sector uses a fixed quantity of biomass energy (“wood”) and another uses coal at a fixed price, matching stylized facts for the British Industrial Revolution. Unlike previous research, we do not assume the level or growth rate of productivity is inherently higher in the coal-using sector. Analytically, greater initial wood scarcity, initial relative knowledge of coal-using technologies, and/or population growth will boost an industrial revolution, while the converse may prevent one forever. An industrial revolution, with eventual dominance by the coal-using sector, is the model's main dynamic outcome, but not inevitable if inter-good substitutability is high enough. Empirical calibration for 1560-1900 produces historically plausible results for changes in energy-related variables during British industrialization, and through counterfactual simulations confirms that it was the growing relative scarcity of wood caused by population growth that resulted in innovation to develop coal-using machines.

Suggested Citation

  • David I. Stern & John C. V. Pezzey & Yingying Lu, 2020. "Directed technical change and the British Industrial Revolution," Departmental Working Papers 2020-29, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2020-29

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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. From Wood to Coal: Directed Technical Change and the British Industrial Revolution
      by (David Stern) in Stochastic Trend on 2017-03-29 08:38:00
    2. Barcelona Talk
      by (David Stern) in Stochastic Trend on 2017-10-19 05:17:00
    3. Annual Review 2017
      by (David Stern) in Stochastic Trend on 2017-12-28 02:26:00
    4. Explaining Malthusian Sluggishness
      by (David Stern) in Stochastic Trend on 2018-01-16 12:55:00
    5. Fourth Franqui Lecture: Energy and the Industrial Revolution
      by (David Stern) in Stochastic Trend on 2021-04-28 01:04:00


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    Cited by:

    1. Lizhan Cao & Zhongying Qi, 2017. "Theoretical Explanations for the Inverted-U Change of Historical Energy Intensity," Sustainability, MDPI, vol. 9(6), pages 1-19, June.
    2. Ravshonbek Otojanov & Roger Fouquet & Brigitte Granville, 2023. "Factor prices and induced technical change in the industrial revolution," Economic History Review, Economic History Society, vol. 76(2), pages 599-623, May.
    3. Christopher Kennedy, 2021. "A biophysical model of the industrial revolution," Journal of Industrial Ecology, Yale University, vol. 25(3), pages 663-676, June.
    4. Emmanuel Bovari & Victor Court, 2019. "Energy, knowledge, and demo-economic development in the long run: a unified growth model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01698755, HAL.
    5. David Hémous & Morten Olsen, 2021. "Directed Technical Change in Labor and Environmental Economics," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 571-597, August.

    More about this item


    Economic growth; economic history; energy; coal; structural change;
    All these keywords.

    JEL classification:

    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N73 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: Pre-1913
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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