Smithian growth in Britain before the Industrial Revolution, 1500-1800

Adam Smith’s claim that the division of labour is one of the major engines of economic growth is a foundational concept in economics. Despite this, we lack measures of the scale and growth of Smithian specialisation over the long run. This paper introduces a novel method based on job titles to measure specialisation. We apply this method to document patterns of Smithian specialisation in early modern Britain. National trends in specialisation were closely associated with economic growth. By 1800, the division of labour was over two and a half times as advanced as in the early sixteenth century, with particularly marked changes within English manufacturing, especially in the mechanical subsector, and, to a lesser extent, services. Specialisation was far less advanced in Wales and Scotland. We study several possible explanations for this change with an IV panel analysis. We find that this significant increase in the division of labour was mostly driven by the growth of the domestic market, in line with Adam Smith’s predictions. Intensive specialisation was concentrated in Middlesex and was helped by a supply factor, Marshallian externalities. Finally, we explore the connection between Smithian Growth and the Industrial Revolution. We find that early specialisation did not lead to later industrial success. Like Adam Smith himself, Smithian specialisation did not predict the Industrial Revolution.