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http://ssrn.com/abstract=1759705
 
 

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The Role of Energy in the Industrial Revolution and Modern Economic Growth


David I. Stern


Australian National University (ANU) - Crawford School of Public Policy

Astrid Kander


Lund University

November 1, 2010

CAMA Working Paper Series 1/2011

Abstract:     
The expansion in the supply of energy services over the last couple of centuries has reduced the apparent importance of energy in economic growth despite energy being an essential production input. We demonstrate this by developing a simple extension of the Solow growth model, which we use to investigate 200 years of Swedish data. We find that the elasticity of substitution between a capital-labor aggregate and energy is less than unity, which implies that when energy services are scarce they strongly constrain output growth resulting in a Malthusian steady-state. When energy services are abundant the economy exhibits the behavior of the “modern growth regime” with the Solow model as a limiting case. The expansion of energy services is found to be a major factor in explaining the industrial revolution and economic growth in Sweden, especially before the second half of the 20th century. In the latter period, labor augmenting technological change becomes the dominant factor driving growth.

Number of Pages in PDF File: 37

Keywords: Unified Growth Theory, Energy, Industrial Revolution, Economic Growth

JEL Classification: O13, O41, Q43, Q56

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Date posted: February 14, 2011  

Suggested Citation

Stern, David I. and Kander, Astrid, The Role of Energy in the Industrial Revolution and Modern Economic Growth (November 1, 2010). CAMA Working Paper Series 1/2011. Available at SSRN: http://ssrn.com/abstract=1759705 or http://dx.doi.org/10.2139/ssrn.1759705

Contact Information

David I. Stern (Contact Author)
Australian National University (ANU) - Crawford School of Public Policy ( email )
ANU College of Asia and the Pacific
Canberra, Australian Capital Territory 0200
Australia

Astrid Kander
Lund University ( email )
Box 117
Lund, S221 00
Sweden
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