Abstract

Exploiting the 1848 revolution in the Austrian Empire, I study how a sudden institutional change impacts economic development. In contrast to much existing research, which focuses on the rule of law and the security of property rights, I argue that the main impact occurred through the expansion of the upper-tail useful human capital (Mokyr, 2005) following the revolution. While the revolution was defeated, important liberalizing reforms persisted in the areas of (i) the press, (ii) technical education and (iii) knowledge-promoting voluntary associations – the information space, for short. Pushing back against the existing consensus that the revolution had no discernible impact on the empire’s economic development, I combine newly collected data on the pre-1848 and post-1848 information space with data on the use and location of steam engines in 1841–1863 to establish the causal link between the post-1848 reforms and the diffusion of this important industrial technology.

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