Discussion paper

DP6293 Trade, Knowledge, and the Industrial Revolution

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.


O'Rourke, K, A Taylor and A Rahman (2007), ‘DP6293 Trade, Knowledge, and the Industrial Revolution‘, CEPR Discussion Paper No. 6293. CEPR Press, Paris & London. https://cepr.org/publications/dp6293