Working Paper: CEPR ID: DP5183
Authors: Stephen N. Broadberry; Bishnupriya Gupta
Abstract: The growth of cotton textile imports into Britain from India opened up new opportunities for import substitution as the new cloths, patterns and designs became increasingly fashionable. However, high silver wages in Britain as a result of high productivity in other tradable goods and services, meant that British producers of cotton textiles could not use labour-intensive Indian production methods. The growth in British labour productivity that resulted from the search for labour-saving technological progress meant that unit labour costs became lower than in India despite the much higher wages in Britain. However, the full effects of the rise in British productivity were delayed until after the Napoleonic Wars by increasing wage and raw cotton costs before supply adjusted to the major increase in demand for inputs. On balance, the effects of British protective measures were neutral.
Keywords: competitive advantage; cotton; India; Lancashire; unit labour costs
JEL Codes: N60; N70; O14; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| growth of cotton textile imports from India (F10) | new opportunities for British manufacturers (L64) |
| high silver wages in Britain (N93) | prevented British producers from adopting labor-intensive Indian production methods (O25) |
| increased British productivity (O49) | lower unit labor costs compared to India (F16) |
| rising productivity in Britain (O49) | shift in competitive advantage (L19) |
| British protective measures (F52) | delayed shift in competitive advantage (L15) |
| technological progress (O33) | lower unit labor costs (J39) |
| technological progress (O33) | reversal of competitive advantage (L19) |
| changes in wage structures (J31) | altered competitive landscape of the cotton textile industry (L67) |