Engel`s Pause: A Pessimist`s Guide to the British Industrial Revolution

Robert Allen and Robert C. Allen
Authors registered in the RePEc Author Service: Robert Carson Allen

No 315, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: The paper reviews the macroeconomic data describing the British economy from 1760 to 1913 and shows that it passed through a two stage evolution of inequality. In the first half of the nineteenth century, the real wage stagnated while output per worker expanded. The profit rate doubled and the share of profits in national income expanded at the expense of labour and land. After the middle of the nineteenth century, real wages began to grow in line with productivity, and the profit rate and factor shares stabilized. An integrated model of growth and distribution is developed to explain these trends. The model includes an aggregate production function that explains the distribution of income, while a savings function in which savings depended on property income governs accumulation. Simulations with the model show that technical progress was the prime mover behind the industrial revolution. Capital accumulation was a necessary complement. The surge in inequality was intrinsic to the growth process. Technical change increased the demand for capital and raised the profit rate and capital`s share. The rise in profits, in turn, sustained the industrial revolution by financing the necessary capital accumulation. After the middle of the nineteenth century, accumulation had caught up with the requirements of technology and wages rose in line with productivity.

Keywords: British Industrial Revolution; Kuznets Curve; Inequality; Savings; Investment (search for similar items in EconPapers)
JEL-codes: D63 N13 O41 O47 O52 (search for similar items in EconPapers)
Date: 2007-04-01
New Economics Papers: this item is included in nep-his and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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