Engineering and Economic Growth: Development of Austria-Hungary’s Machine Building Industry in the Late Nineteenth Century

This study examines the economic development of the machine-building industry in the Habsburg Empire and its role in the process of industrialization. The new evidence from the capital goods sector, the timing and extent of changes in machinery output and investment, strongly supports the notion of a Great Depression in Austria from 1873 to the mid-1890s and the direction of capital flows as a causal factor. However, with significantly faster than average long-run rates of expansion, the machine-building industry made a direct contribution to industrial growth in both Austria and Hungary. The rise in labour and total factor productivity in mechanical engineering was reflected in falling output prices, thus enhancing productivity growth in the machinery using industries. In both parts of the Habsburg Empire, most of the labour productivity raising machinery was procured from domestic suppliers where output per worker grew markedly faster than in the aggregate economy.