The Industrial Revolution was characterized by technological
progress and an increasing capital intensity. Why did real wages stagnate
or fall in the beginning? I answer this question by modeling the Industrial
Revolution as the introduction of a relatively more capital intensive
production method in a standard neoclassical framework. I show that
{\sl real wages fall in the beginning of an industrial revolution if and
only if technological progress in the relatively more capital intensive
sector ...
The Industrial Revolution was characterized by technological
progress and an increasing capital intensity. Why did real wages stagnate
or fall in the beginning? I answer this question by modeling the Industrial
Revolution as the introduction of a relatively more capital intensive
production method in a standard neoclassical framework. I show that
{\sl real wages fall in the beginning of an industrial revolution if and
only if technological progress in the relatively more capital intensive
sector is relatively fast.}
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