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The role of energy in the industrial revolution and modern economic growth

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Author

Summary, in English

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 low income 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 economic growth in Sweden, especially before the second half of the 20th century. After 1950, labor-augmenting technological change becomes the dominant factor driving growth though energy still plays a role.

Publishing year

2012

Language

English

Pages

125-152

Publication/Series

Energy Journal

Volume

33

Issue

3

Document type

Journal article

Publisher

International Association for Energy Economics

Topic

  • Economic History

Keywords

  • Unified growth theory
  • energy
  • Industrial Revolution
  • economic growth

Status

Published

ISBN/ISSN/Other

  • ISSN: 0195-6574