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Commercialisation, Factor Prices and Technological Progress in the Transition to Modern Economic Growth

  • Broadberry, Stephen

    (Department of Economics, University of Warwick)

  • Ghosal, Sayantan

    (Department of Economics, University of Warwick)

  • Proto, Eugenio

    (Department of Economics, University of Warwick)

We provide a model of the links between commercialisation and technological progress, which is consistent with the historical evidence and places market relations at the heart of the industrial revolution. First, commercialisation raised wages as a growing reliance on impersonal labour market transactions in place of customary relations with a high degree of monitoring led to the adoption of efficiency wages. Second, commercialisation lowered interest rates as a growing reliance on impersonal capital market transactions in place of active investor involvement in investment projects led investors to allow borrowers to keep a larger share of the profits. Third, the resulting rise in the wage/cost of capital ratio led to the adoption of a more capital-intensive technology. Fourth, this led to a faster rate of technological progress through greater learning by doing on the capital intensive production technology. Fifth, the rate of technological progress was raised further by the patent system, which allowed the commercialisation of property rights in innovations embodied in machinery.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp_852.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 852.

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Length: 30 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:wrk:warwec:852
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  1. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
  2. Hans-Joachim Voth, 1997. "Time and Work in Eighteenth-Century London," Oxford University Economic and Social History Series _021, Economics Group, Nuffield College, University of Oxford.
  3. Daron Acemoglu & Simon Johnson & James Robinson, 2005. "The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth," American Economic Review, American Economic Association, vol. 95(3), pages 546-579, June.
  4. Sullivan, Richard J., 1989. "England's Age of invention: The acceleration of patents and patentable invention during the industrial revolution," Explorations in Economic History, Elsevier, vol. 26(4), pages 424-452, October.
  5. Pamuk, Sevket, 2007. "The Black Death and the origins of the across Europe, 1300 1600," European Review of Economic History, Cambridge University Press, vol. 11(03), pages 289-317, December.
  6. Stephen Broadberry & Bishnupriya Gupta, 2009. "Lancashire, India, and shifting competitive advantage in cotton textiles, 1700-1850: the neglected role of factor prices -super-1," Economic History Review, Economic History Society, vol. 62(2), pages 279-305, 05.
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  11. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
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  13. Cole, Arthur H. & Crandall, Ruth, 1964. "The International Scientific Committee on Price History," The Journal of Economic History, Cambridge University Press, vol. 24(03), pages 381-388, September.
  14. 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.
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