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Luddites and the Demographic Transition

Kevin H. O'Rourke, Ahmed S. Rahman and Alan M. Taylor

Abstract

Technological change was unskilled-labor-biased during the early Industrial Revolution, but is skill-biased today. This is not embedded in extant unified growth models. We develop a model which can endogenously account for these facts, where factor bias reflects profit-maximizing decisions by innovators. Endowments dictate that the early Industrial Revolution be unskilled-labor-biased. Increasing basic knowledge causes a growth takeoff, an income-led demand for fewer educated children, and the transition to skill-biased technological change. The simulated model tracks British industrialization in the 18th and 19th centuries and generates a demographic transition without relying on either rising skill premia or exogenous educational supply shocks.

Keywords:

endogenous growth, demography, unified growth theory

JEL codes:

O31, O33, J13, J24, N10.


Last updated 28 August 2014 by IIIS (Email).