EconPapers    
Economics at your fingertips  
 

Debt into Growth: How Sovereign Debt accelerated the First Industrial Revolution

Jaume Ventura and Hans-Joachim Voth

No 10652, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Why did the country that borrowed the most industrialize first? Earlier research has viewed the explosion of debt in 18th century Britain as either detrimental, or as neutral for economic growth. In this paper, we argue instead that Britain’s borrowing boom was beneficial. The massive issuance of liquidly traded bonds allowed the nobility to switch out of low-return investments such as agricultural improvements. This switch lowered factor demand by old sectors and increased profits in new, rising ones such as textiles and iron. Because external financing contributed little to the Industrial Revolution, this boost in profits in new industries accelerated structural change, making Britain more industrial more quickly. The absence of an effective transfer of financial resources from old to new sectors also helps to explain why the Industrial Revolution led to massive social change – because the rich nobility did not lend to or invest in the revolutionizing industries, it failed to capture the high returns to capital in these sectors, leading to relative economic decline.

Keywords: crowding out; debt crises; financial repression; Industrial Revolution; misallocation; productivity; Ricardian equivalence; structural change (search for similar items in EconPapers)
JEL-codes: E22 E25 E62 H56 H60 N13 N23 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-his and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10652 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Debt into Growth: How Sovereign Debt Accelerated the First Industrial Revolution (2015) Downloads
Working Paper: Debt into Growth: How Sovereign Debt Accelerated the First Industrial Revolution (2015) Downloads
Working Paper: Debt into growth: How sovereign debt accelerated the first Industrial Revolution (2015) Downloads
Working Paper: Debt into growth: how sovereign debt accelerated the first industrial revolution (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:10652

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=10652

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2020-05-03
Handle: RePEc:cpr:ceprdp:10652