DP6293 Trade, Knowledge, and the Industrial Revolution

Author(s): Kevin Hjortshøj O'Rourke, Ahmed Rahman, Alan M. Taylor
Publication Date: May 2007
Keyword(s): demography, endogenous growth, trade
JEL(s): F15, J13, J24, N10, O31, O33
Programme Areas: International Macroeconomics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=6293

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.