Ugo Gragnolati (Université Paris 1 Panthéon-Sorbonne) on "Factor prices, scale, and income distribution: Explaining technology adoption during the British Industrial Revolution" (joint work with Daniele Moschella and Emanuele Pugliese)

Speaker:  Ugo Gragnolati - Université Paris 1 Panthéon-Sorbonne
  Wednesday, February 17, 2021 at 12:00 PM Zoom webinar: https://univr.zoom.us/j/89588033735
Why was the Industrial Revolution British? This question has received a variety of answers pointing to rather distinct proximate causes of early industrialization. More precisely, virtually all accounts recognize that the mechanization of production was made possible by an unprecedented surge in innovative activities; yet, wide divergences exist as to what might have sparked such a surge specifically in England around 1760's. Elements as diverse as demography, culture and ideology, institutions, and factor prices are regarded as being the key ingredient in the various tentative explanations of the Industrial Revolution. The most strictly economic of these accounts rationalizes the wave of new machines that made for industrialization as the result of an increased demand for labor-saving technologies. In this view, while the rudimentary technical skills needed to produce the new machines were relatively widespread in 18th century Europe, only in England was the price of labor relative to capital high enough to justify the adoption of the labor-saving technologies that characterized the Industrial Revolution (Allen, 2009). In this seminar, we will summarize some of the main criticalities underlying such an argument, focusing in particular on the shortcomings of the profitability calculations on which it is based. In addition, we will point out how technology adoption during the Industrial Revolution can hardly be explained by factor prices alone without also considering the role of scale economies and final demand. Namely, the labor-saving innovations of the Industrial Revolution were profitable only above a minimum output threshold, which allowed to cover the upfront cost of capital. In turn, the possibility to exceed such threshold depended on consumer demand, which was affected by the level and by the distribution of real income. To discuss these issues in a comparative perspective, we adopt the exact same case study and data as Allen (2009), thus focusing on the adoption of the spinning jenny and on the cotton industry in England and France during the second half of the 18th century.

Programme Director
Roberto Ricciuti

External reference
Publication date
November 9, 2020

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