Engels' pause

Technical change, capital accumulation, and inequality in the british industrial revolution

Robert (Bob) Allen

    Research output: Contribution to journalArticle

    Abstract

    The paper reviews the macroeconomic data describing the British economy from 1760 to 1913 and shows that it passed through a two stage evolution of inequality. In the first half of the 19th century, the real wage stagnated while output per worker expanded. The profit rate doubled and the share of profits in national income expanded at the expense of labour and land. After the middle of the 19th century, real wages began to grow in line with productivity, and the profit rate and factor shares stabilized. An integrated model of growth and distribution is developed to explain these trends. The model includes an aggregate production function that explains the distribution of income, while a savings function in which savings depended on property income governs accumulation. Simulations with the model show that technical progress was the prime mover behind the industrial revolution. Capital accumulation was a necessary complement. The surge in inequality was intrinsic to the growth process: technical change increased the demand for capital and raised the profit rate and capital's share. The rise in profits, in turn, sustained the industrial revolution by financing the necessary capital accumulation. After the middle of the 19th century, accumulation had caught up with the requirements of technology and wages rose in line with productivity.

    Original languageEnglish (US)
    Pages (from-to)418-435
    Number of pages18
    JournalExplorations in Economic History
    Volume46
    Issue number4
    DOIs
    StatePublished - Oct 1 2009

    Fingerprint

    Technical change
    Profit rate
    Capital accumulation
    Industrial revolution
    Friedrich Engels
    Pause
    Technical Change
    Profit
    Industrial Revolution
    Productivity
    Savings
    Real wages
    Income
    Real Wages
    Integrated model
    Technical progress
    Financing
    Simulation
    Macroeconomics
    Distribution of income

    Keywords

    • British industrial revolution
    • Inequality
    • Investment
    • Kuznets curve
    • Savings

    ASJC Scopus subject areas

    • History
    • Economics and Econometrics

    Cite this

    Engels' pause : Technical change, capital accumulation, and inequality in the british industrial revolution. / Allen, Robert (Bob).

    In: Explorations in Economic History, Vol. 46, No. 4, 01.10.2009, p. 418-435.

    Research output: Contribution to journalArticle

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