Is Industrialization Conducive to Long-Run Prosperity?

Raphael Franck and Oded Galor

No 9158, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This research explores the long-run effect of industrialization on the process of development. In contrast to conventional wisdom that views industrial development as a catalyst for economic growth, the study establishes that while the adoption of industrial technology was conducive to economic development in the short-run, it has had a detrimental effect on standards of living in the long-run. Exploiting exogenous source of regional variation in the adoption of steam engines during the French industrial revolution, the research establishes that regions in which industrialization was more intensive experienced an increase in literacy rates more swiftly and generated higher income per capita in the subsequent decades. Nevertheless, intensive industrialization has had an adverse effect on income per capita, employment and equality by the turn of the 21st century. This adverse effect reflects neither higher unionization and wage rates nor trade protection, but rather underinvestment in human capital and lower employment in skilled-intensive occupations. These findings suggest that the characteristics that permitted the onset of industrialization, rather than the adoption of industrial technology per se, have been the source of prosperity among the currently developed economies that experienced an early industrialization.

Keywords: economic growth; industrialization; steam engine (search for similar items in EconPapers)
JEL-codes: N33 N34 O14 O33 (search for similar items in EconPapers)
Pages: 83 pages
Date: 2015-06
New Economics Papers: this item is included in nep-cse, nep-evo, nep-gro, nep-his and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Is Industrialization Conducive to Long-Run Prosperity? (2015)
Working Paper: Is Industrialization Conducive to Long-Run Prosperity? (2015)
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