DP6293 Trade, Knowledge, and the Industrial Revolution

Author(s): Kevin H. 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/pubs/dps/DP6293.asp.asp

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.