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The Role of Energy in the Industrial Revolution and Modern Economic Growth

Stern, David and Kander, Astrid LU (2011)
Abstract
The expansion in the supply of energy services over the last couple of centuries has reduced the apparent importance of energy in economic growth despite energy being an essential production input. We demonstrate this by developing a simple extension of the Solow growth model, which we use to investigate 200 years of Swedish data. We find that the elasticity of substitution between a capital-labor aggregate and energy is less than unity, which implies that when energy services are scarce they strongly constrain output growth resulting in a Malthusian steady-state. When energy services are abundant the economy exhibits the behavior of the “modern growth regime” with the Solow model as a limiting case. The expansion of energy services is... (More)
The expansion in the supply of energy services over the last couple of centuries has reduced the apparent importance of energy in economic growth despite energy being an essential production input. We demonstrate this by developing a simple extension of the Solow growth model, which we use to investigate 200 years of Swedish data. We find that the elasticity of substitution between a capital-labor aggregate and energy is less than unity, which implies that when energy services are scarce they strongly constrain output growth resulting in a Malthusian steady-state. When energy services are abundant the economy exhibits the behavior of the “modern growth regime” with the Solow model as a limiting case. The expansion of energy services is found to be a major factor in explaining the industrial revolution and economic growth in Sweden, especially before the second half of the 20th century. In the latter period, labor-augmenting technological change becomes the dominant factor driving growth. (Less)
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author
organization
publishing date
type
Working Paper
publication status
submitted
subject
keywords
Unified growth theory, Industrial Revolution, energy, economic growth
publisher
CAMA, Working paper series in Canberra
language
English
LU publication?
yes
id
6be5deac-5505-4133-b409-7bb14067c655 (old id 1729198)
date added to LUP
2010-12-06 12:45:35
date last changed
2016-10-11 08:35:56
@misc{6be5deac-5505-4133-b409-7bb14067c655,
  abstract     = {The expansion in the supply of energy services over the last couple of centuries has reduced the apparent importance of energy in economic growth despite energy being an essential production input. We demonstrate this by developing a simple extension of the Solow growth model, which we use to investigate 200 years of Swedish data. We find that the elasticity of substitution between a capital-labor aggregate and energy is less than unity, which implies that when energy services are scarce they strongly constrain output growth resulting in a Malthusian steady-state. When energy services are abundant the economy exhibits the behavior of the “modern growth regime” with the Solow model as a limiting case. The expansion of energy services is found to be a major factor in explaining the industrial revolution and economic growth in Sweden, especially before the second half of the 20th century. In the latter period, labor-augmenting technological change becomes the dominant factor driving growth.},
  author       = {Stern, David and Kander, Astrid},
  keyword      = {Unified growth theory,Industrial Revolution,energy,economic growth},
  language     = {eng},
  publisher    = {ARRAY(0xc289318)},
  title        = {The Role of Energy in the Industrial Revolution and Modern Economic Growth},
  year         = {2011},
}