Directed technical change and the British Industrial Revolution

David Stern, John Pezzey and Yingying Lu

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: We build a directed technical change model where one intermediate goods sector uses a fixed quantity of biomass energy (“wood”) and another uses coal at a fixed price, matching stylized facts for the British Industrial Revolution. Unlike previous research, we do not assume the level or growth rate of productivity is inherently higher in the coal-using sector. Analytically, greater initial wood scarcity, initial relative knowledge of coal-using technologies, and/or population growth will boost an industrial revolution, while the converse may prevent one forever. An industrial revolution, with eventual dominance by the coal-using sector, is the model's main dynamic outcome, but not inevitable if inter-good substitutability is high enough. Empirical calibration for 1560-1900 produces historically plausible results for changes in energy-related variables during British industrialization, and through counterfactual simulations confirms that it was the growing relative scarcity of wood caused by population growth that resulted in innovation to develop coal-using machines.

Keywords: Economic growth; economic history; energy; coal; structural change (search for similar items in EconPapers)
JEL-codes: N13 N73 O33 O41 Q43 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2020
New Economics Papers: this item is included in nep-ene, nep-gro, nep-his and nep-ino
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Directed Technical Change and the British Industrial Revolution (2021)
Working Paper: Directed technical change and the British Industrial Revolution (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2020-29

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