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Capital substitution in an industrial revolution
Author(s) -
Berg Peter,
Staley Mark
Publication year - 2015
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12187
Subject(s) - economics , capital good , substitution (logic) , capital (architecture) , productivity , industrial revolution , function (biology) , growth rate , capital deepening , growth model , order (exchange) , monetary economics , labour economics , macroeconomics , capital formation , economy , market economy , human capital , financial capital , goods and services , mathematics , finance , archaeology , law , history , computer science , biology , geometry , evolutionary biology , political science , programming language
A unified growth model is presented in which productivity growth is driven by learning‐by‐doing. We show that the growth rate of productivity is an increasing function of the share of capital. It is assumed that the industrial sector has a higher capital share than the agricultural sector and that the ability to substitute one output for the other in the construction of capital goods slowly rises over time. Two distinct regimes of constant growth emerge, connected by a rapid transition in which the growth rate of income increases by an order of magnitude, indicative of an industrial revolution.