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Inequality and the Industrial Revolution

Author

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  • Madsen, Jakob
  • Strulik, Holger

Abstract

In this paper, we propose a new theory for why income inequality can be conducive to early industrial development. Technological advances in agriculture and population growth increase land rents relative to wages and as the landed elites become richer, demand for manufactured goods increases, which in turn facilitates industrialization. Using data for Britain over the period 1270–1940, we show that increasing inequality was a major contributor to the expansion of the manufacturing sector. Taking into account the more well-known drivers of modern growth, we find that inequality is a major contributor to the British Industrial Revolution, alongside foreign trade, education, technological knowledge and, to some extent, institutions.

Suggested Citation

  • Madsen, Jakob & Strulik, Holger, 2024. "Inequality and the Industrial Revolution," European Economic Review, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:eecrev:v:164:y:2024:i:c:s0014292124000539
    DOI: 10.1016/j.euroecorev.2024.104724
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    More about this item

    Keywords

    Inequality; Industrialization; Consumption; Technological progress; Structural change; Unified growth theory;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development

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