Trade, Knowledge, and the Industrial Revolution
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 profit-maximising 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.
We acknowledge funding from the European Community's Sixth Framework Programme through its Marie Curie Research Training Network programme, contract numbers MRTN-CT-2004-512439 and HPRN-CT-2002-00236. We also thank the Center for the Evolution of the Global Economy at the University of California, Davis, for financial support. Some of the work on the project was undertaken while O'Rourke was a Government of Ireland Senior Research Fellow and while Taylor was a Guggenheim Fellow; we thank the Irish Research Council for the Humanities and Social Sciences and the John Simon Guggenheim Memorial Foundation for their generous support. For their helpful criticisms and suggestions we thank Gregory Clark, Oded Galor, Philippe Martin, Joel Mokyr, Andrew Mountford, Joachim Voth, and participants in workshops at Royal Holloway; LSE; Carlos III; University College, Galway; and Paris School of Economics; in the CEPR conferences "Europe's Growth and Development Experience" held at the University of Warwick, 28-30 October 2005, "Trade, Industrialisation and Development" held at Villa Il Poggiale, San Casciano Val di Pesa (Florence), 27-29 January 2006, and "Economic Growth in the Extremely Long Run" held at the European University Institute, 27 June-1 July, 2006; at the NBER International Trade and Investment program meeting, held at NBER, Palo Alto, Calif., 1-2 December 2006; and at the NBER Evolution of the Global Economy workshop, held at NBER, Cambridge, Mass., 2 March 2007. The latter workshop was supported by NSF grant OISE 05-36900 administered by the NBER. All errors are ours. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.