IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/6293.html
   My bibliography  Save this paper

Trade, Knowledge, and the Industrial Revolution

Author

Listed:
  • O'Rourke, Kevin
  • Taylor, Alan M.
  • Rahman, Ahmed

Abstract

Technological change was unskilled-labour-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-labour 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.

Suggested Citation

  • O'Rourke, Kevin & Taylor, Alan M. & Rahman, Ahmed, 2007. "Trade, Knowledge, and the Industrial Revolution," CEPR Discussion Papers 6293, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6293
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP6293
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Oded Galor & Omer Moav, 2002. "Natural Selection and the Origin of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1133-1191.
    2. Becker, Gary S & Tomes, Nigel, 1976. "Child Endowments and the Quantity and Quality of Children," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 143-162, August.
    3. Matthias Doepke, 2004. "Accounting for Fertility Decline During the Transition to Growth," Journal of Economic Growth, Springer, vol. 9(3), pages 347-383, September.
    4. Matthias Doepke & Fabrizio Zilibotti, 2003. "Voting with Your Children: A Positive Analysis of Child Labor Laws," UCLA Economics Working Papers 828, UCLA Department of Economics.
    5. 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.
    6. O’Rourke, Kevin H. & Williamson, Jeffrey G., 2002. "When did globalisation begin?," European Review of Economic History, Cambridge University Press, vol. 6(1), pages 23-50, April.
    7. 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.
    8. Galor, Oded, 2005. "From Stagnation to Growth: Unified Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 4, pages 171-293, Elsevier.
    9. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    10. Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
    11. Antoni Estevadeordal & Brian Frantz & Alan M. Taylor, 2003. "The Rise and Fall of World Trade, 1870–1939," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 359-407.
    12. Van Zanden, Jan Luiten, 2009. "The skill premium and the ‘Great Divergence’," European Review of Economic History, Cambridge University Press, vol. 13(1), pages 121-153, April.
    13. K. H. O'Rourke & J. G. Williamson, 2001. "After Columbus: Explaining the Global Trade Boom 1500-1800," CEG Working Papers 20014, Trinity College Dublin, Department of Economics.
    14. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    15. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    16. Allen,Robert C., 2009. "The British Industrial Revolution in Global Perspective," Cambridge Books, Cambridge University Press, number 9780521868273, September.
    17. 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.
    18. Horrell Sara & Humphries Jane, 1995. "The Exploitation of Little Children: Child Labor and the Family Economy in the Industrial Revolution," Explorations in Economic History, Elsevier, vol. 32(4), pages 485-516, October.
    19. 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.
    20. Jeffrey D. Sachs, 2000. "Tropical Underdevelopment," CID Working Papers 57A, Center for International Development at Harvard University.
    21. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    22. Kenneth L. Sokoloff, 1984. "Was the Transition from the Artisanal Shop to the Factory Associated with Gains in Efficiency?: Evidence from the U.S. Manufacturing Censuses of 1820 and 1850," UCLA Economics Working Papers 300, UCLA Department of Economics.
    23. Clark, Gregory, 1987. "Why Isn't the Whole World Developed? Lessons from the Cotton Mills," The Journal of Economic History, Cambridge University Press, vol. 47(1), pages 141-173, March.
    24. Oded Galor & David N. Weil, 1998. "Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition," Working Papers 98-3, Brown University, Department of Economics, revised 19 Aug 1998.
    25. Jacob L. Weisdorf, 2004. "From stagnation to growth: Revisiting three historical regimes," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(3), pages 455-472, August.
    26. Claudia Goldin & Lawrence F. Katz, 2007. "The Race between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005," NBER Working Papers 12984, National Bureau of Economic Research, Inc.
    27. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins of Technology-Skill Complementarity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 693-732.
    28. Williamson,Jeffrey G., 1990. "Coping with City Growth during the British Industrial Revolution," Cambridge Books, Cambridge University Press, number 9780521364805, October.
    29. Steve Dowrick & Mark Rogers, 2002. "Classical and technological convergence: beyond the Solow-Swan growth model," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 369-385, July.
    30. Sokoloff, Kenneth L., 1984. "Was the transition from the artisanal shop to the nonmechanized factory associated with gains in efficiency?: Evidence from the U.S. Manufacturing censuses of 1820 and 1850," Explorations in Economic History, Elsevier, vol. 21(4), pages 351-382, October.
    31. Alejandro Cunat & Marco Maffezzoli, 2003. "The Generalized Neoclassical Growth Model," Working Papers 231, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    32. Mokyr, Joel, 2005. "Long-Term Economic Growth and the History of Technology," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 17, pages 1113-1180, Elsevier.
    33. Jeffrey D. Sachs, 2000. "Tropical Underdevelopment," CID Working Papers 57, Center for International Development at Harvard University.
    34. Diego Comin & Bart Hobijn & Emilie Rovito, 2006. "Five Facts You Need to Know About Technology Diffusion," NBER Working Papers 11928, National Bureau of Economic Research, Inc.
    35. Oded Galor & Andrew Mountford, 2004. "Trading Population for Productivity," GE, Growth, Math methods 0410001, University Library of Munich, Germany.
    36. Kalemli-Ozcan, Sebnem, 2002. "Does the Mortality Decline Promote Economic Growth?," Journal of Economic Growth, Springer, vol. 7(4), pages 411-439, December.
    37. Matteo Cervellati & Uwe Sunde, 2005. "Human Capital Formation, Life Expectancy, and the Process of Development," American Economic Review, American Economic Association, vol. 95(5), pages 1653-1672, December.
    38. Oded Galor & Omer Moav, 2000. "Das Human Kapital," Working Papers 2000-17, Brown University, Department of Economics.
    39. Galor, Oded & Weil, David, 1998. "Population, Technology and Growth: From the Malthusian Regime to the Demographic Transition," CEPR Discussion Papers 1981, C.E.P.R. Discussion Papers.
    40. Claudia Goldin & Lawrence F. Katz, 1999. "The Returns to Skill in the United States across the Twentieth Century," NBER Working Papers 7126, National Bureau of Economic Research, Inc.
    41. Oded Galor, 2006. "The Demographic Transition," Working Papers 2006-24, Brown University, Department of Economics.
    42. Barro, Robert J & Becker, Gary S, 1989. "Fertility Choice in a Model of Economic Growth," Econometrica, Econometric Society, vol. 57(2), pages 481-501, March.
    43. Oded Galor & Omer Moav, 2006. "Das Human-Kapital: A Theory of the Demise of the Class Structure," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(1), pages 85-117.
    44. Jacks, David S. & Meissner, Christopher M. & Novy, Dennis, 2010. "Trade costs in the first wave of globalization," Explorations in Economic History, Elsevier, vol. 47(2), pages 127-141, April.
    45. Mitch, David, 1983. "The Spread of Literacy in Nineteenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 43(1), pages 287-288, March.
    46. Claudia Goldin & Robert A. Margo, 1992. "The Great Compression: The Wage Structure in the United States at Mid-Century," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 1-34.
    47. Oded Galor, 2011. "Unified Growth Theory," Economics Books, Princeton University Press, edition 1, number 9477.
    48. Mokyr, Joel, 2005. "The Intellectual Origins of Modern Economic Growth," The Journal of Economic History, Cambridge University Press, vol. 65(2), pages 285-351, June.
    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. Michael Kremer, 1993. "Population Growth and Technological Change: One Million B.C. to 1990," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 681-716.
    51. Kevin O’rourke & Jeffrey Williamson, 2005. "From Malthus to Ohlin: Trade, Industrialisation and Distribution Since 1500," Journal of Economic Growth, Springer, vol. 10(1), pages 5-34, January.
    52. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World," Introductory Chapters, in: A Farewell to Alms: A Brief Economic History of the World, Princeton University Press.
    53. Abramovitz, Moses & David, Paul A, 1973. "Reinterpreting Economic Growth: Parables and Realities," American Economic Review, American Economic Association, vol. 63(2), pages 428-439, May.
    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. Ahmed S. Rahman, 2008. "A Tale of Two Skill Premia," Working Papers 8021, Economic History Society.
    2. Joan R. Ros s & Kevin H. O'Rourke & Jeffrey G. Williamson, 2007. "Globalization, Growth and Distribution in Spain 1500-1913," Trinity Economics Papers tep0407, Trinity College Dublin, Department of Economics.
    3. Garner, Phillip, 2008. "Productivity revolutions and science driven growth," Economics Letters, Elsevier, vol. 101(1), pages 24-26, October.
    4. David Flacher, 2005. "Industrial Revolutions and Consumption: A Common Model to the Various Periods of Industrialization," Working Papers halshs-00132241, HAL.
    5. Petros Milionis, 2012. "Long-Run Development in the Open Economy," DEGIT Conference Papers c017_059, DEGIT, Dynamics, Economic Growth, and International Trade.

    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. Kevin H. O'Rourke & Ahmed S. Rahman & Alan M. Taylor, 2008. "Luddites and the Demographic Transition," NBER Working Papers 14484, National Bureau of Economic Research, Inc.
    2. Kevin O’Rourke & Ahmed Rahman & Alan Taylor, 2013. "Luddites, the industrial revolution, and the demographic transition," Journal of Economic Growth, Springer, vol. 18(4), pages 373-409, December.
    3. Ahmed S. Rahman, 2010. "An Exceptionally Simple Theory of Industrialization," Departmental Working Papers 27, United States Naval Academy Department of Economics.
    4. Oded Galor, 2010. "The 2008 Lawrence R. Klein Lecture-Comparative Economic Development: Insights From Unified Growth Theory," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 1-44, February.
    5. Broadberry Stephen, 2012. "Recent Developments in the Theory of Very Long Run Growth: A Historical Appraisal," Jahrbuch für Wirtschaftsgeschichte / Economic History Yearbook, De Gruyter, vol. 53(1), pages 277-306, May.
    6. Galor, Oded, 2006. "Economic Growth in the Very Long Run," MPRA Paper 76648, University Library of Munich, Germany.
    7. Sascha Becker & Francesco Cinnirella & Ludger Woessmann, 2010. "The trade-off between fertility and education: evidence from before the demographic transition," Journal of Economic Growth, Springer, vol. 15(3), pages 177-204, September.
    8. Strulik, Holger & Werner, Katharina, 2014. "Elite education, mass education, and the transition to modern growth," University of Göttingen Working Papers in Economics 205, University of Goettingen, Department of Economics.
    9. Luis Angeles, 2010. "Demographic transitions: analyzing the effects of mortality on fertility," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 99-120, January.
    10. Oded Galor & Andrew Mountford, 2006. "Trade and the Great Divergence: The Family Connection," American Economic Review, American Economic Association, vol. 96(2), pages 299-303, May.
    11. Jakob B. Madsen & Fabrice Murtin, 2017. "British economic growth since 1270: the role of education," Journal of Economic Growth, Springer, vol. 22(3), pages 229-272, September.
    12. Quamrul Ashraf & Oded Galor, 2011. "Dynamics and Stagnation in the Malthusian Epoch," American Economic Review, American Economic Association, vol. 101(5), pages 2003-2041, August.
    13. Joel Mokyr & Hans-Joachim Voth, 2012. "Understanding Growth in Europe, 1700–1870: Theory and Evidence," Journal of Economic Sociology, National Research University Higher School of Economics, vol. 13(5), pages 57-102.
    14. Lehmann-Hasemeyer, Sibylle H. & Prettner, Klaus & Tscheuschner, Paul, 2020. "The scientific revolution and its role in the transition to sustained economic growth," Hohenheim Discussion Papers in Business, Economics and Social Sciences 06-2020, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    15. Schäfer, Andreas & Prettner, Klaus, 2016. "The fall and rise of inequality," VfS Annual Conference 2016 (Augsburg): Demographic Change 145806, Verein für Socialpolitik / German Economic Association.
    16. Emmanuel Bovari & Victor Court, 2019. "Energy, knowledge, and demo-economic development in the long run: a unified growth model," Working Papers hal-01698755, HAL.
    17. Sunde, Uwe & Cervellati, Matteo, 2007. "Human Capital, Mortality and Fertility: A Unified Theory of the Economic and Demographic Transition," CEPR Discussion Papers 6384, C.E.P.R. Discussion Papers.
    18. Galor, Oded & Michalopoulos, Stelios, 2006. "The Evolution of Entrepreneurial Spirit and the Process of Development," CEPR Discussion Papers 6022, C.E.P.R. Discussion Papers.
    19. 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.
    20. William Lord & Peter Rangazas, 2006. "Fertility and development: the roles of schooling and family production," Journal of Economic Growth, Springer, vol. 11(3), pages 229-261, September.

    More about this item

    Keywords

    Demography; Endogenous growth; Trade;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    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:cpr:ceprdp:6293. 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: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    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.