Four centuries of British economic growth: the roles of technology and population

J Econ Growth (2010) 15:263290 DOI 10.1007/s10887-010-9057-7

Jakob B. Madsen James B. Ang Rajabrata Banerjee

Published online: 21 October 2010 Springer Science+Business Media, LLC 2010

Abstract Using long historical data for Britain over the period 16202006, this paper seeks to explain the importance of innovative activity, population growth and other factors in inducing the transition from the Malthusian trap to the post-Malthusian growth regime. Furthermore, the paper tests the ability of two competing second-generation endogenous growth models to account for the British growth experience. The results suggest that innovative activity was an important force in shaping the Industrial Revolution and that the British growth experience is consistent with Schumpeterian growth theory.

Keywords Endogenous growth British Industrial Revolution

JEL Classication O30 O40

1 Introduction

Before the late eighteenth century, per capita growth rates were either zero or miniscule and average per capita incomes in different regions of the world were quite similar (Galor 2005; Maddison 2007). Galor and Weil (2000), Hansen and Prescott (2002) and Galor (2005) argue that this period of stagnation can be described as the Malthusian epoch. Instead of resulting in improved standards of living, technological progress led to increased population. However, with the onset of the Great Divergence around 1760, on the eve of the First Industrial Revolution in Britain, the British economy began the transformation from the Malthusian trap to the post-Malthusian epoch during which the rate of technological progress outpaced the population growth drag, resulting in positive per capita growth rates. Yet the transformation of the British economy is still one of the great mysteries in the history of human evolution.

Economic growth literature contains extensive coverage of Britain due mainly to its preeminent position in the First Industrial Revolution and the availability of well-documented

J. B. Madsen J. B. Ang (B) R. Banerjee

Department of Economics, Monash University, 900 Dandenong Road, Cauleld East, VIC 3145, Australia

Four centuries of British economic growth: the roles of technology and population

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264 J Econ Growth (2010) 15:263290

historical facts and data. However, despite being one of the most significant events in economic history, little is known about the role played by innovation in freeing the British economy from its Malthusian straightjacket. While the literature suggests different roles played by technology during...