IDEAS home Printed from https://ideas.repec.org/p/cgs/wpaper/92.html
   My bibliography  Save this paper

Factor prices and induced technical change in the Industrial Revolution

Author

Listed:
  • Ravshonbek Otojanov and Roger Fouquet

Abstract

Allen (2009) has argued that the divergence in factor prices determined the direction of technical change that altered the course of economic growth in Britain. Using historical data for the 1700 – 1914 period, this paper derives and analyses the nature and direction of technical change. The results show that technical change was biased during the Industrial Revolution and that the bias stemmed from the divergence in the cost of labour and energy. In particular, labour saving responded strongly to the acceleration in wage growth in the 1850-1914 period. Overall, technical change was labour-saving, energy-using and hence capital-deepening. Moreover, the evidence shows that the expansion of effective energy supply allowed British economy to sustain output growth in the First Industrial Revolution era. Labour-saving innovations were particularly crucial in the Second Industrial Revolution.

Suggested Citation

  • Ravshonbek Otojanov and Roger Fouquet, 2018. "Factor prices and induced technical change in the Industrial Revolution," Working Papers 92, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    • Handle: RePEc:cgs:wpaper:92
    as

    Download full text from publisher

    File URL: http://cgr.sbm.qmul.ac.uk/CGRWP92.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. N. F. R. Crafts & C. K. Harley, 1992. "Output growth and the British industrial revolution: a restatement of the Crafts-Harley view," Economic History Review, Economic History Society, vol. 45(4), pages 703-730, November.
    2. Nicholas Crafts & Pieter Woltjer, 2021. "Growth Accounting In Economic History: Findings, Lessons And New Directions," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 670-696, July.
    3. Crafts, Nicholas, 2004. "Productivity Growth in the Industrial Revolution: A New Growth Accounting Perspective," The Journal of Economic History, Cambridge University Press, vol. 64(2), pages 521-535, June.
    4. de Pleijt, Alexandra M., 2015. "Human capital and long run economic growth : Evidence from the stock of human capital in England, 1300-1900," CAGE Online Working Paper Series 229, Competitive Advantage in the Global Economy (CAGE).
    5. Nuvolari, Alessandro & Tartari, Valentina & Tranchero, Matteo, 2021. "Patterns of innovation during the Industrial Revolution: A reappraisal using a composite indicator of patent quality," Explorations in Economic History, Elsevier, vol. 82(C).
    6. Jane Humphries & Jacob Weisdorf, 2019. "Unreal Wages? Real Income and Economic Growth in England, 1260–1850," The Economic Journal, Royal Economic Society, vol. 129(623), pages 2867-2887.
    7. Jones Charles I., 2001. "Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(2), pages 1-45, August.
    8. Devine, Warren D., 1983. "From Shafts to Wires: Historical Perspective on Electrification," The Journal of Economic History, Cambridge University Press, vol. 43(2), pages 347-372, June.
    9. Antras, Pol & Voth, Hans-Joachim, 2003. "Factor prices and productivity growth during the British industrial revolution," Explorations in Economic History, Elsevier, vol. 40(1), pages 52-77, January.
    10. Nicholas Crafts, 2004. "Steam as a general purpose technology: A growth accounting perspective," Economic Journal, Royal Economic Society, vol. 114(495), pages 338-351, April.
    11. Miguel A. León-Ledesma & Peter McAdam & Alpo Willman, 2010. "Identifying the Elasticity of Substitution with Biased Technical Change," American Economic Review, American Economic Association, vol. 100(4), pages 1330-1357, September.
    12. Kander, Astrid & Stern, David I., 2014. "Economic growth and the transition from traditional to modern energy in Sweden," Energy Economics, Elsevier, vol. 46(C), pages 56-65.
    13. Broadberry,Stephen & Campbell,Bruce M. S. & Klein,Alexander & Overton,Mark & van Leeuwen,Bas, 2015. "British Economic Growth, 1270–1870," Cambridge Books, Cambridge University Press, number 9781107070783, September.
    14. Roger Fouquet & Peter J.G. Pearson, 2012. "The Long Run Demand for Lighting:Elasticities and Rebound Effects in Different Phases of Economic Development," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    15. Roger Fouquet & Stephen Broadberry, 2015. "Seven Centuries of European Economic Growth and Decline," Journal of Economic Perspectives, American Economic Association, vol. 29(4), pages 227-244, Fall.
    16. Hans-Joachim Voth, 2003. "Living Standards During the Industrial Revolution: An Economist's Guide," American Economic Review, American Economic Association, vol. 93(2), pages 221-226, May.
    17. John Hassler & Per Krusell & Conny Olovsson, 2021. "Directed Technical Change as a Response to Natural Resource Scarcity," Journal of Political Economy, University of Chicago Press, vol. 129(11), pages 3039-3072.
    18. David I. Stern & John C. V. Pezzey & Yingying Lu, 2021. "Directed Technical Change and the British Industrial Revolution," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(6), pages 1079-1114.
    19. Hall, B. & Jaffe, A. & Trajtenberg, M., 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," Papers 2001-29, Tel Aviv.
    20. Temin, Peter, 1997. "Two Views of the British Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 57(1), pages 63-82, March.
    21. Allen,Robert C., 2009. "The British Industrial Revolution in Global Perspective," Cambridge Books, Cambridge University Press, number 9780521868273.
    22. Stokey, Nancy L., 2001. "A quantitative model of the British industrial revolution, 1780-1850," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 55-109, December.
    23. 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.
    24. Hassler, John & Olovsson, Conny, 2012. "Energy-Saving Technical Change," CEPR Discussion Papers 9177, C.E.P.R. Discussion Papers.
    25. Wrigley,E. A., 2010. "Energy and the English Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521766937, September.
    26. Nicholas Crafts, 2021. "The Sources Of British Economic Growth Since The Industrial Revolution: Not The Same Old Story," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 697-709, July.
    27. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    28. van der Werf, Edwin, 2008. "Production functions for climate policy modeling: An empirical analysis," Energy Economics, Elsevier, vol. 30(6), pages 2964-2979, November.
    29. Jakob Madsen & James Ang & Rajabrata Banerjee, 2010. "Four centuries of British economic growth: the roles of technology and population," Journal of Economic Growth, Springer, vol. 15(4), pages 263-290, December.
    30. Roger Fouquet & Peter J. G. Pearson, 1998. "A Thousand Years of Energy Use in the United Kingdom," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-41.
    31. Nico Voigtländer & Hans-Joachim Voth, 2006. "Why England? Demographic factors, structural change and physical capital accumulation during the Industrial Revolution," Journal of Economic Growth, Springer, vol. 11(4), pages 319-361, December.
    32. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
    33. Nicholas Crafts, 2021. "Understanding productivity growth in the industrial revolution," Economic History Review, Economic History Society, vol. 74(2), pages 309-338, May.
    34. Fouquet, Roger, 2010. "The slow search for solutions: Lessons from historical energy transitions by sector and service," Energy Policy, Elsevier, vol. 38(11), pages 6586-6596, November.
    35. Clark, Gregory & Jacks, David, 2007. "Coal and the Industrial Revolution, 1700–1869," European Review of Economic History, Cambridge University Press, vol. 11(1), pages 39-72, April.
    36. Petra Moser, 2012. "Innovation without Patents: Evidence from World's Fairs," Journal of Law and Economics, University of Chicago Press, vol. 55(1), pages 43-74.
    37. Fouquet, Roger, 2015. "The allocation of energy resources in the very long run," LSE Research Online Documents on Economics 62367, London School of Economics and Political Science, LSE Library.
    38. David I. Stern and Astrid Kander, 2012. "The Role of Energy in the Industrial Revolution and Modern Economic Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    39. Gechert, Sebastian & Havranek, Tomas & Irsova, Zuzana & Kolcunova, Dominika, 2019. "Death to the Cobb-Douglas Production Function? A Quantitative Survey of the Capital-Labor Substitution Elasticity," MPRA Paper 95949, University Library of Munich, Germany.
    40. Allen, Robert C., 2012. "Backward into the future: The shift to coal and implications for the next energy transition," Energy Policy, Elsevier, vol. 50(C), pages 17-23.
    41. Roger Fouquet, 2011. "Divergences in Long-Run Trends in the Prices of Energy and Energy Services," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 196-218, Summer.
    42. Morgan Kelly & Joel Mokyr & Cormac Ó Gráda, 2014. "Precocious Albion: A New Interpretation of the British Industrial Revolution," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 363-389, August.
    43. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    44. Roger Fouquet, 2008. "Heat, Power and Light," Books, Edward Elgar Publishing, number 4061.
    45. Josh Lerner & Scott Stern, 2012. "The Rate and Direction of Inventive Activity Revisited," NBER Books, National Bureau of Economic Research, Inc, number lern11-1.
    46. Roger Fouquet, 2014. "Editor's Choice Long-Run Demand for Energy Services: Income and Price Elasticities over Two Hundred Years," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(2), pages 186-207.
    47. Harley, C. Knick & Crafts, N.F.R., 2000. "Simulating the Two Views of the British Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 60(3), pages 819-841, September.
    48. repec:oup:econjl:v:129:y:2019:i:10:p:2867-2887. is not listed on IDEAS
    49. David N. Weil & Oded Galor, 2000. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond," American Economic Review, American Economic Association, vol. 90(4), pages 806-828, September.
    50. Paolo Malanima, 2016. "Energy consumption in England and Italy, 1560–1913. Two pathways toward energy transition," Economic History Review, Economic History Society, vol. 69(1), pages 78-103, February.
    51. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
    52. Gregory Clark, 2007. "The long march of history: Farm wages, population, and economic growth, England 1209–18691," Economic History Review, Economic History Society, vol. 60(1), pages 97-135, February.
    53. Broadberry, Stephen & Campbell, Bruce M.S. & van Leeuwen, Bas, 2013. "When did Britain industrialise? The sectoral distribution of the labour force and labour productivity in Britain, 1381–1851," Explorations in Economic History, Elsevier, vol. 50(1), pages 16-27.
    54. G Cameron, 1996. "Innovation and Economic Growth," CEP Discussion Papers dp0277, Centre for Economic Performance, LSE.
    55. Peter King, 2005. "The production and consumption of bar iron in early modern England and Wales," Economic History Review, Economic History Society, vol. 58(1), pages 1-33, February.
    56. Feinstein, Charles H., 1998. "Pessimism Perpetuated: Real Wages and the Standard of Living in Britain during and after the Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 58(3), pages 625-658, September.
    57. Fouquet, Roger, 2014. "Long run demand for energy services: income and price elasticities over two hundred years," LSE Research Online Documents on Economics 59070, London School of Economics and Political Science, LSE Library.
    58. Wrigley,E. A., 2010. "Energy and the English Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521131858, September.
    59. Astrid Kander & Paolo Malanima & Paul Warde, 2013. "Power to the People: Energy in Europe over the Last Five Centuries," Economics Books, Princeton University Press, edition 1, number 10138.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fouquet, Roger & Hippe, Ralph, 2022. "Twin transitions of decarbonisation and digitalisation: a historical perspective on energy and information in European economies," LSE Research Online Documents on Economics 115544, London School of Economics and Political Science, LSE Library.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kander, Astrid & Stern, David I., 2014. "Economic growth and the transition from traditional to modern energy in Sweden," Energy Economics, Elsevier, vol. 46(C), pages 56-65.
    2. Emmanuel Bovari & Victor Court, 2019. "Energy, knowledge, and demo-economic development in the long run: a unified growth model," Working Papers hal-01698755, HAL.
    3. Agovino, Massimiliano & Bartoletto, Silvana & Garofalo, Antonio, 2019. "Modelling the relationship between energy intensity and GDP for European countries: An historical perspective (1800–2000)," Energy Economics, Elsevier, vol. 82(C), pages 114-134.
    4. Christopher Kennedy, 2021. "A biophysical model of the industrial revolution," Journal of Industrial Ecology, Yale University, vol. 25(3), pages 663-676, June.
    5. Nicholas Crafts, 2021. "Understanding productivity growth in the industrial revolution," Economic History Review, Economic History Society, vol. 74(2), pages 309-338, May.
    6. Fouquet, Roger, 2016. "Lessons from energy history for climate policy: technological change, demand and economic development," LSE Research Online Documents on Economics 67785, London School of Economics and Political Science, LSE Library.
    7. van de Ven, Dirk Jan & Fouquet, Roger, 2017. "Historical energy price shocks and their changing effects on the economy," Energy Economics, Elsevier, vol. 62(C), pages 204-216.
    8. Christopher Kennedy, 2020. "The energy embodied in the first and second industrial revolutions," Journal of Industrial Ecology, Yale University, vol. 24(4), pages 887-898, August.
    9. Broadberry, Stephen & Ghosal, Sayantan & Proto, Eugenio, 2017. "Anonymity, efficiency wages and technological progress," Journal of Development Economics, Elsevier, vol. 127(C), pages 379-394.
    10. Cormac Ó Gráda, 2016. "Did Science Cause the Industrial Revolution?," Journal of Economic Literature, American Economic Association, vol. 54(1), pages 224-239, March.
    11. Tepper, Alexander & Borowiecki, Karol Jan, 2015. "Accounting for breakout in Britain: The industrial revolution through a Malthusian lens," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 219-233.
    12. Roger Fouquet, 2015. "Lessons from energy history for climate policy," GRI Working Papers 209, Grantham Research Institute on Climate Change and the Environment.
    13. Nico Voigtländer & Hans-Joachim Voth, 2006. "Why England? Demographic factors, structural change and physical capital accumulation during the Industrial Revolution," Journal of Economic Growth, Springer, vol. 11(4), pages 319-361, December.
    14. Madsen, Jakob & Strulik, Holger, 2024. "Inequality and the Industrial Revolution," European Economic Review, Elsevier, vol. 164(C).
    15. James Foreman‐Peck & Peng Zhou, 2018. "Late marriage as a contributor to the industrial revolution in England," Economic History Review, Economic History Society, vol. 71(4), pages 1073-1099, November.
    16. Gregory Casey, 2024. "Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(1), pages 192-228.
    17. Morgan Kelly & Joel Mokyr & Cormac Ó Gráda, 2023. "The Mechanics of the Industrial Revolution," Journal of Political Economy, University of Chicago Press, vol. 131(1), pages 59-94.
    18. Richard Green & Nicholas Vasilakos, 2012. "Storing Wind for a Rainy Day: What Kind of Electricity Does Denmark Export?," The Energy Journal, , vol. 33(3), pages 1-22, July.
    19. Sofia Teives Henriques & Paul Sharp, 2021. "Without coal in the age of steam and dams in the age of electricity: an explanation for the failure of Portugal to industrialize before the Second World War," European Review of Economic History, European Historical Economics Society, vol. 25(1), pages 85-105.
    20. Sofia Teives Henriques & Paul Sharp, 2016. "The Danish agricultural revolution in an energy perspective: a case of development with few domestic energy sources," Economic History Review, Economic History Society, vol. 69(3), pages 844-869, August.

    More about this item

    Keywords

    Industrial Revolution; Factor-Saving Technical Change; Induced Technical Change; Productivity; Innovation.;
    All these keywords.

    JEL classification:

    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cgs:wpaper:92. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Pedro S. Martins (email available below). General contact details of provider: https://edirc.repec.org/data/cgqmwuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.