Education and Catch-up in the Industrial Revolution

Sascha O Becker, Erik Hornung, Ludger Woessmann
2011 American Economic Journal: Macroeconomics  
Michèle Tertilt, and seminar participants at Ifo Munich, IZA Bonn, and the Universities of Liverpool, Munich, Stirling, and Swansea are gratefully acknowledged. Our results are also validated when using an alternative instrument, distance to Wittenberg where Luther used to preach, which yields historically exogenous variation in education across Prussia due to Protestants' urge for literacy to read the Bible (Becker and Woessmann 2009). Several additional aspects of our framework facilitate
more » ... work facilitate empirical identification, as they introduce exogeneity into the emergence of industrial technologies in Prussia. First, the Industrial Revolution is characterized by production techniques that had not been available before. The new modes of production created a new sector -mechanized industry. This distinguishes analyses of historical industrialization from analyses of agricultural advancement over time and from more general analyses of economic development. Second, most industrial technologies were first applied in Britain, making their advent exogenous from a Prussian perspective. They came as an exogenous "shock" (in the econometric sense of a matter determined outside the variation employed in the model) simultaneously to all Prussian counties once fundamental institutional reforms had freed up the Prussian economy in the first two decades of the 19 th century. Third, by using micro-regional data to exploit within-Prussian variation, we can exclude that fundamental institutional or geographical differences determine the capacity for technological adoption, because the Prussian counties share a common basic institutional, cultural, and climatic background. As a consequence, the advent of the industrial technologies in Prussia is like an historical experiment that came from Britain as an exogenous shock. The remainder of the paper is structured as follows. Section I briefly places the analysis in a theoretical framework and provides historical background. Sections II and III introduce the empirical model and the database, respectively. Section IV presents the results. Section V interprets the results in relation to the existing British evidence. Section VI concludes.
doi:10.1257/mac.3.3.92 fatcat:46u3y3pvnvbz3kl7qtd4hpq6ta