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¿MHÜ tiMH ;;9*IH*; ' o ¡■¿>o.-xo-- ' v i ' P!®nraUI ONIVaslTY INSTITUTE RECEIVED 0 5 OTT. 1998 European University institute i LIBRARY Department of History and Civilizatiorr The Early Phase of Catalan Industrialisation, 3 1830-1861 t * Juan Ramón Rosés Vendoiro Thesis submitted with a view to obtaining the degree of doctor of the European University Institute Eramining Jury: I Professor Albert Carreras i Odriozola, Universität Pompeu Fabra Professor Nicholas F.R. Crafts, London School of Economics ? Professor Leandro Prados de la Escosura, Universidad Carlos III de Madrid Professor Jaime Reis. European University Institute (supervisor) Florence, October 1998 IHIIJWIIIMUWHUJUUIUJUUUUmiUUUlilJlW1 European University Institute Ill'llU lU 111 1.11 I I I I <1 ||.l lilllllllil 3 0001 0032 5921 7 European University Institute Department of History and Civilization The Early Phase of Catalan Industrialisation, 1830-1861 Juan Ramón Rosés Vendoiro Thesis submitted with a view to obtaining the degree of doctor of the European University Institute Examining Jury: Professor Albert Carreras i Odriozola, Universität Pompeu Fabra Professor Nicholas F.R. Crafts, London School of Economics Professor Leandro Prados de la Escosura, Universidad Carlos III de Madrid Professor Jaime Reis, European University Institute (supervisor) LIB 9 4 6 .0 7 2 - S ROS Florence, October 1998 °*U) *7^7^?^** ei * f**e^ *• * í* i *.1 . e* *»e* *. *; *t*. To Eva and Claudia I V Abstract There are few more crucial episodes in economic history than the industrialisation of some regions of Europe during the first half of the nineteenth century. This thesis attempts to make a contribution to the history of early industrialisation by rigorously analysing the transition process through which a proto-industrial region hopes to move from a condition of slow industry growth rates to one of self-sustained industry growth. I hope to accomplish this task by drawing liberally on the stock of existing economic theory and then proceeding to weave them into an explanation of industry growth in Catalonia from 1830 to 1861. First, the familiar neo-classical equation for decomposing growth rates is used to estimate the contribution of factor accumulation and productivity improvement to modem industry growth rates. This leads to results that are significantly different from those advanced by the literature on Catalan industrialisation. The discussion underlines the importance of disembodied innovation, rather than the previous accumulation of capital, the transference of foreign technologies or the elastic supply of labour. Second, I offer evidence that this increase in total factor productivity was the consequence of the development of new business institutions. In particular, the transition from the decentralised forms of production to more efficient factories. The thesis also supports the hypothesis that factor endowments and the level of human capital associated with scale economies explains the localization of factories in Catalonia. Finally, two points of broad relevance should be noted. One is that the conventional wisdom that factor accumulation is crucial in early industrialisation needs to be reconsidered. The other point is that it seems necessary to recognize that factor endowments, local knowledge and market forces, specially those connected with the development of new institutions and new products, were far more important than standard texts of European economic history tended to allow. m J vii Index of Contents Abstract v Index of Contents vii Index of Tables xi Index of Figures xv Acknowledgements xvii Weights and Measures xix 1. Introduction 1 1.1. Some Woids on the Purpose and Limits of this Dissertation 1 1.2. Catalonia in the European Debate 5 1.3. Plan of the Thesis and Overview 12 Part I. Explaining output growth 2. The Growth of Catalan Industry Output 15 2.1. Introduction 15 2.2. A New Yearly Index of Cotton Industry Production (1830*1861) 18 2.3. Catalan Manufacturing Output (1840-1861) 41 2.4. The Role of the Catalan Industry in the Growth of the Economy 49 2.5. Conclusions 60 3. Capital as a Factor of Production 61 3.1. Introduction 61 3.2. Definitions, Methodology and Historical Sources 66 33. Empirical Results 80 3.4. Conclusions 90 4. The Transformation of the Labour Market in Manufacturing 93 4.1. Introduction 93 4.2. The Literature on the Contribution of Labour to the Early Industrialisation 95 43. Evidence on Manufacturing Employment 100 4.4. Evidence on Labour Remuneration 107 43. Evidence on Capital-skills Complementarity 113 viii 4. 6. A Simple Model of the Early Industrialisation Labour Market 127 4.7. Conclusions 130 5. The Contribution of Productivity Growth 131 5.1. Introduction 131 5.2. An Overview of the Literatures on Productivity Measurement 132 5.3. Methodology 140 5.4. Empirical Results: Labour Productivity 145 5.5. Empirical Results: Total Factor Productivity 148 5.6. Conclusions 156 Appendix to Chapter 5: The Indices of Labour Input 158 Part II. Inside the 'Black Box': Explaining productivity growth 6. The Contribution of Human Capital 161 6.1. Introduction 161 6.2. A Methodology to Estimate Human Capital 164 6.3. The levels of Human Capital in the Labour Force 166 6.4. The Effect of the Spread of the Factory System 175 6.5. The Contribution of Human Capital to Growth 183 6.6. Concluding Remarks 186 Appendix to Chapter 6: Methods and Souces for Growth Accounting 189 7. The Emergence of the Factory System 191 7.1. Introduction 192 7.2. The Emergence of the Factory System in the Literature 194 7.3. Testing the Efficiency of the Factories: Estimates of Returns to Scale 200 7.4. The Emergence of Factories in the Cotton Industry 206 15. Establishment Size in Catalonia: A Comparison with the Rest of Spain 217 7.6. Why Were Menufacturing Establishments Larger in Catalonia than in Other Spanish Regions 223 7.7. Summary and Conclusions 227 8. The Vertical Integration in the Cotton Industry 228 8.1. Introduction 230 8.2. The Theoretical Framework 233 8.3. The Scope of Vertical Integration in Catalonia 237 IX 8.4. The Determinants of Vertical Integration 246 8.5. The Consequences of vertical Integration 257 8.6. Summary and Conclusions 261 9. Technology and International Competitiveness ■ 263 9.1. Introduction 264 9.2 Technical Choice: Machinery, Workforce Skills, and Organization 266 93 Technical Choice: Product Quality 272 9.4. International Competitiveness: The Price of Outputs 282 9.5. International Competitiveness: The Price of Raw Materials 286 9.6. Productivity Comparisons 292 9.7. Conclusions 30] 10. Conclusion 303 Bibliography 309 XI Index of Tables 2.1. Prices of the Main Input and Outputs: Cotton Industry 1830-1861 31 2.2. Sectoral Output Indices: Cotton Industry, 1830-1861 32 2.3. Intermediate Inputs Indices: Cotton Industry, 1830-1861 35 2.4. Value-added Indices: Cotton Industry, 1830-1861 37 25. Aggregate Indices: Cotton Industry, 1830-1861 40 2.6. Value of Sectoral Output: Other Textiles, 1840-1861 43 2.7. Sectoral Output and Intermediate Inputs: Modem industries, 1840-61(current prices) 44 2.8. Prices of Inputs and Outputs: Other Textiles 1840-1861 47 2.9. Price Indices of Sectoral Output and Intermediate Inputs: Modem Industries, 1840-61 48 2.10. Growth Rates of Sectoral Output and Value-added: Modem Industries, 1840-1861 48 2.11. Growth rates of Aggregate Sectoral Output, Intermediate Inputs and Value-added: Modem Industries, 1840-61 49 2.12. Alternative Industrial Indices: Catalonia, Spain and Andalusia, 1830-1861 50 2.13. Share of the Textile Industries: Spanish Industry Value-added, 1860 58 2.14. Contribution to Overall Growth Rates: Catalan Industry, 1830-1860 59 3.1. Capital Goods Prices, 1840-1861 69 3.2. Physical Productivity of Cotton Spindles: Catalonia, 1849-1861 77 3.3. Growth Rates of Capital Inputs and Sectoral Output: Modem Industries,1840-1861 81 3.4. Growth Rates of Capital Input and Sectoral Output: Cotton Industry, 1830-1861 83 3.5. Net Stock of Capital: Modem Industries, 1830-1861 84 3.6. Changes in the Composition of Net Stock of Capital: Modem Industries, 1830-1861 86 4.1. Evolution of Labourforce: Modem Industries, 1830-1861 103 4.2. Proportion of Men, Women and Child Labour Industry, 1840-1861 105 4.3. Alternative Price Indices, 1830-1861 108 4.4. Nominal Yearly Earnings: Modem Industries, 1830-1861 110 4.5. Real Yearly Earnings: Modem Industries, 1840-1861 111 4.6. The Sex-age Wage Gap: Cotton Industry and Agriculture, 1840-1861 112 4.7. The Skills Wage Gap: Cotton Industry in Barcelona, 1830-1861 114 4.8. Daily Nominal Wages: Agriculture, 1830-1860 115 4.9. Determinants of Wages, 1840 117 4.10. Cobb-Dòuglas Labour Demand Elasticities, 1840 120 * - - - - u m Xll 4.11. Translog Labour Demand Elasticities, 1840 123 5.1. Shares of Inputs in Total Payments: Modem Industries, 1840-1861 144 5.2. Labour Productivity Growth: Modem Industries, 1840-1861 146 5.3. Contribution of Factor Accumulation and TFP to Sectoral Output Growth: Modem Industries, 1840-1861 149 5.4. Contribution of Factor Accumulation and TFP to Value-added Growth: Cotton Industries, 1830-1861 152 5.5. Quantity and Quality Decomposition of Growth Rates: Cotton Industry, 1830-1861 154 5.6. Growth Rates of Labour Input and Its Components: Cotton Industry, 1840-1861 159 5.7. Growth Rates of Labour Input and Its Components: Cotton Industry, 1840-1861 160 6.1. Male Yearly Earnings: Selected Cotton Factory Jobs, Barcelona 1856 172 6.2. Composition of the Labour Force in Full-time Equivalent Employment: Cotton Spinning and Weaving , 1830-1861 178 6.3. Skills Composition of Adult Workforce in Full-time Equivalent Employment: Cotton Spinning and Weaving, 1830-1861 180 6.4. Remuneration of Production Factors in Value-added: Cotton Spinning and Weaving 182 6.5.