Infrastructure Finance and Industrial Take-Off in England

That financial matters did not constrain industrial takeoff in the UK is gener- ally accepted in the historical literature; in contrast, contemporary empirical analyses have found evidence that financial development can be a causal determinant of economic growth. We look to reconcile these findings by concentrating on a particular aspect of industrializing UK where inefficien- cies in finance could have had bite: the finance of physical infrastructures. We document the historical record and develop the importance of spatial dis- aggregation and spillovers in both technological and financial development. We develop a simple model that captures the nature of infrastructure finance within a theory of endogenous growth where financial costs are endogenous. We argue that the conception of the finance-growth nexus as a largely static, aggregative phenomenon misses out a good deal of complexity and we relate that complexity to a number of implications for regulation of both financial systems and the emergence of infrastructures.