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Trade, Knowledge, and the Industrial Revolution

Kevin H. O'Rourke, Ahmed S. Rahman and Alan M. Taylor

Abstract

Technological change was unskilled-labor-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 profitmaximising decisions of innovators. Endowments dictated that the initial stages of the Industrial Revolution be unskilled-labor 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.

Keywords : Endogenous growth, Demography, Trade

JEL classification : O31, O33, J13, J24, F15, N10


Last updated 28 August 2014 by IIIS (Email).