nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒12‒19
two papers chosen by
Marc Klemp
University of Copenhagen

  1. Slavery and the British Industrial Revolution By Stephan Heblich; Stephen J. Redding; Hans-Joachim Voth
  2. Necessity of Rational Asset Price Bubbles in Two-Sector Growth Economies By Tomohiro Hirano; Ryo Jinnai; Alexis Akira Toda

  1. By: Stephan Heblich; Stephen J. Redding; Hans-Joachim Voth
    Abstract: Did overseas slave-holding by Britons accelerate the Industrial Revolution? We provide theory and evidence on the contribution of slave wealth to Britain's growth prior to 1835. We compare areas of Britain with high and low exposure to the colonial plantation economy, using granular data on wealth from compensation records. Before the major expansion of slave holding from the 1640s onwards, both types of area exhibited similar levels of economic activity. However, by the 1830s, slavery wealth is strongly correlated with economic development - slave-holding areas are less agricultural, closer to cotton mills, and have higher property wealth. We rationalize these findings using a dynamic spatial model, where slavery investment raises the return to capital accumulation, expanding production in capital-intensive sectors. To establish causality, we use arguably exogenous variation in slave mortality on the passage from Africa to the Indies, driven by weather shocks. We show that weather shocks influenced the continued involvement of ancestors in the slave trade; weather-induced slave mortality of slave-trading ancestors in each area is strongly predictive of slaveholding in 1833. Quantifying our model using the observed data, we find that Britain would have been substantially poorer and more agricultural in the absence of overseas slave wealth. Overall, our findings are consistent with the view that slavery wealth accelerated Britain's industrial revolution.
    Keywords: industrial revolution, overseas slave-holding, slavery wealth
    Date: 2022–11–16
  2. By: Tomohiro Hirano; Ryo Jinnai; Alexis Akira Toda
    Abstract: We study a two-sector endogenous growth model in which entrepreneurs have access to a production technology subject to idiosyncratic investment risk (tech sector) and a dividend-paying asset (land) is traded. We prove that in any rational expectations equilibrium, the land price exceeds its fundamental value if and only if the time series of aggregate wealth is unbounded. When the leverage limit is relaxed beyond a critical value, the unique trend stationary equilibrium exhibits a phase transition from the fundamental regime to the bubbly regime with growth, accompanied by an increase in top-end wealth concentration measured by the Pareto exponent.
    Date: 2022–11

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