Is Industrialization Conducive to Long-Run Prosperity?

82 Pages Posted: 2 Jun 2015

See all articles by Raphael Franck

Raphael Franck

Hebrew University of Jerusalem - Department of Economics

Oded Galor

Brown University - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 29, 2015

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, highlighting its persistent effect on economic prosperity, the study establishes that while the adoption of industrial technology was initially conducive to economic development, 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 which industrialized earlier experienced an increase in literacy rates more swiftly and generated higher income per capita in the subsequent decades. Nevertheless, early industrialization had an adverse effect on income per capita, employment and equality by the turn of the 21st century. This adverse effect reects 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

JEL Classification: N330, N340, O140, O330

Suggested Citation

Franck, Raphael and Galor, Oded, Is Industrialization Conducive to Long-Run Prosperity? (May 29, 2015). CESifo Working Paper Series No. 5354. Available at SSRN: https://ssrn.com/abstract=2613372

Raphael Franck

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel

Oded Galor (Contact Author)

Brown University - Department of Economics ( email )

Providence, RI 02912
United States

HOME PAGE: http://www.econ.brown.edu/fac/Oded_Galor/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://www.econ.brown.edu/fac/Oded_Galor/

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