Human Capital Formation during the First Industrial Revolution: Evidence from the Use of Steam Engines

This paper explores the effect of technological change on human capital formation during the
early phases of England’s Industrial Revolution. Following the methodology used in Franck
and Galor (2016), we consider the adoption of steam engines as an indicator of technical
change, examining the correlation between industrialisation and human capital by performing
cross-sectional regression analyses using county-level variation in the number of steam
engines installed in England by 1800. Using exogenous variation in carboniferous rock strata
as an instrument for the regional distribution of steam engines, we find that technological
change as captured by steam technology significantly improved the average working skills of
the labour force. In particular, places with more steam engines had lower shares of unskilled
workers and higher shares of highly-skilled mechanical workmen deemed important by
Mokyr (2005) in the Industrial Revolution. Technological change was, however, not
conducive to elementary education. Literacy rates and school enrollment rates were not
systematically different in places with more steam engines. This diverse response to new
technology highlights the ambiguous effects of early industrialisation on the formation of
human capital.