Commercialisation, factor prices and technological progress in the transition to modern economic growth
Broadberry, Stephen, Ghosal, Sayantan and Proto, Eugenio (2008) Commercialisation, factor prices and technological progress in the transition to modern economic growth. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.852).
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We provide a model of the links between commercialisation and technological progress, which is consistent with the historical evidence and places market relations at the heart of the industrial revolution. First, commercialisation raised wages as a growing reliance on impersonal labour market transactions in place of customary relations with a high degree of monitoring led to the adoption of efficiency wages. Second, commercialisation lowered interest rates as a growing reliance on impersonal capital market transactions in place of active investor involvement in investment projects led investors to allow borrowers to keep a larger share of the profits. Third, the resulting rise in the wage/cost of capital ratio led to the adoption of a more capital-intensive technology. Fourth, this led to a faster rate of technological progress through greater learning by doing on the capital intensive production technology. Fifth, the rate of technological progress was raised further by the patent system, which allowed the commercialisation of property rights in innovations embodied in machinery.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HF Commerce|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Industrialization -- Europe, Economic development -- Europe, Technological innovations -- Europe, Europe -- Economic policy, Europe -- Economic conditions|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||10 April 2008|
|Number of Pages:||30|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
Acemoglu, D., Johnson, S. and Robinson, J. (2005), “The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth”, American Economic Review, 95, 546-579.
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