Cotton Textiles and the Great Divergence: Lancashire, India and Shifting Competitive Advantage, 1600-1850
50 Pages Posted: 25 Aug 2005
Date Written: August 2005
The growth of cotton textile imports into Britain from India opened up new opportunities for import substitution as the new cloths, patterns and designs became increasingly fashionable. However, high silver wages in Britain as a result of high productivity in other tradable goods and services, meant that British producers of cotton textiles could not use labor-intensive Indian production methods. The growth in British labor productivity that resulted from the search for labor-saving technological progress meant that unit labor costs became lower than in India despite the much higher wages in Britain. However, the full effects of the rise in British productivity were delayed until after the Napoleonic Wars by increasing wage and raw cotton costs before supply adjusted to the major increase in demand for inputs. On balance, the effects of British protective measures were neutral.
Keywords: Cotton, competitive advantage, unit labor costs, Lancashire, India
JEL Classification: N60, N70, O14, O31
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