What boosts innovation? Evidence from history

Innovation boosts economic growth. But what boosts innovations? This PhD thesis examines the diffusion of innovation in 19th-century France, a time when new discoveries, industrialization, declining transport costs, and trade liberalization were shaping our modern economies. This work, divided into three main chapters corresponding to three articles, uses diverse identification strategies to understand the causes and consequences of industrial technologies. The first article uses all-inclusive industrial censuses from 19th-century France to analyse the effect on wages and employment of the diffusion of steam-power. The results show higher rates of growth of employment and wages in steam-adopting industries than in non-steam adopting ones, and thus dispute the widespread belief that industrial modernisation entailed technical unemployment and falling labour-compensation. The second article tests the role of trade liberalization on industrial decisions to innovate. Here, too, the empirical basis rests on national industrial censuses from France but combined with industry-specific trade changes detailed in the Cobden–Chevalier Treaty of 1860. The findings suggest a positive and profound effect of trade liberalization on steam power adoption, which I argue was a direct response to increased foreign competition. The third and last article of this PhD thesis focuses on the link between rising international trade and firms’ invention. Using quarterly patent data, classified by 78 sub-industrial sectors, and exploiting the French historical episode of the Cobden-Chevalier Treaty, the analysis uncovers a higher number of patent applications in the subsectors exposed to the tariff reduction of 1860. An effect that is higher in the first year of the trade policy implementation.