Globalization and the Industrial Revolution

Abstract

This paper argues that trade specialization played an indispensable role in sup porting the Industrial Revolution. We calibrate a two-good and two-sector overlapping generations model to Englandís historical development and investigate how much dif ferent Englandís development path would have been if it had not globalized in 1840. We show that the two-sectors closed economy model cannot explain the fall in the value of land relative to wages observed in the 19th century and that, absent globalization, the British economy would never have escaped its Malthusian trap.