Hostname: page-component-cd9895bd7-jn8rn Total loading time: 0 Render date: 2024-12-19T02:21:51.105Z Has data issue: false hasContentIssue false
  • English
  • Français

A SIMPLE THEORY OF THE EFFECTS OF INDUSTRIALIZATION

Published online by Cambridge University Press:  06 January 2016

Ahmed S. Rahman
Ahmed S. Rahman*
Affiliation:
United States Naval Academy
*
Address correspondence to: Ahmed S. Rahman, Department of Economics, United States Naval Academy, Annapolis, MD 21402, USA; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Historically, industrialization has been associated with falling relative returns to skills. This fact is at odds with most unified theories of industrialization, which tend to imply rising skill premia as natural concomitants of economic growth. This paper develops a very simple model of historical growth to help solve this puzzle. Assuming that human capital is both a consumption good and an investment good, the model demonstrates how gradually rising investments in human capital, nonmonotonic fertility rates, and falling skill premia can all be explained within one theory.

Keywords

Endogenous DemographySkill PremiumUnified Growth Theory
Type
Articles
Information
Macroeconomic Dynamics , Volume 21 , Issue 1 , January 2017 , pp. 106 - 129
Copyright
Copyright © Cambridge University Press 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Acemoglu, Daron (2008) Introduction to Modern Economic Growth. Princeton, NJ: Princeton University Press.Google Scholar
A'Hearn, Brian, Baten, Jörg, and Crayen, Dorothee (2009) Quantifying quantitative literacy: Age heaping and the history of human capital. Journal of Economic History 68, 783–808.CrossRefGoogle Scholar
Alstadsaeter, Annette and Sievertsen, Hans Henrik (2009) The Consumption Value of Higher Education. CESinfo working paper 2871.Google Scholar
Autor, David, Katz, Lawrence, and Krueger, Alan (1998) Computing inequality: Have computers changed the labor market? Quarterly Journal of Economics 113, 1169–1213.Google Scholar
Becker, Gary (1960) An economic analysis of fertility. In Demographic and Economic Change in Developed Countries, pp. 209–231. Princeton, NJ: National Bureau of Economic Research.Google Scholar
Becker, Gary (1981) A Treatise on the Family. Cambridge, MA: Harvard University Press.Google Scholar
Becker, Gary, Murphy, Kevin, and Tamura, Robert (1990) Human capital, fertility and economic growth. Journal of Political Economy 98, S12–S37.Google Scholar
Bell, Philip (1951) Cyclical variations and trend in occupational wage differentials in American industry since 1914. Review of Economics and Statistics 33, 329–337.Google Scholar
Boucekkine, Raouf, de la Croix, David, and Licandro, Omar (2002) Vintage human capital, demographic trends, and economic growth. Journal of Economic Theory 104, 340–375.Google Scholar
Broadberry, Stephen (1994) Technological leadership and productivity leadership in manufacturing since the Industrial Revolution: Implications for the convergence debate. Economic Journal 104, 291–302.Google Scholar
Cervellati, Matteo and Sunde, Uwe (2005) Human capital formation, life expectancy, and the process of development. American Economic Review 95, 1653–1672.Google Scholar
Cervellati, Matteo and Sunde, Uwe (2011) Life expectancy and economic growth: The role of the Demographic Transition. Journal of Economic Growth 16, 99–133.Google Scholar
Ciccone, Antonio and Peri, Giovanni (2005) Long-run substitutability between more and less educated workers: Evidence from U.S. States 1950–90. Review of Economics and Statistics 87, 652–663.Google Scholar
Clark, Gregory (2005) The condition of the working class in England, 1209–2004. Journal of Political Economy 113, 1307–1340.Google Scholar
Clark, Gregory (2007) A Farewell to Alms: A Brief Economic History of the World. Princeton, NJ: Princeton University Press.Google Scholar
Cressy, David (1980) Literacy and the Social Order: Reading and Writing in Tudor and Stuart England. Cambridge, UK: Cambridge University Press.Google Scholar
Feinstein, Charles (1978) Capital formation in Great Britain. In Mathias, Peter and Postan, M.M. (eds.), The Cambridge Economic History of Europe, Vol. 8, Part 1, “The Industrial Economies: Capital, Labour and Enterprise,” pp. 28–96. Cambridge, UK: Cambridge University Press.Google Scholar
Flora, Peter, Kraus, Franz, and Pfenning, Winfried (1983) State Economy and Society in Western Europe, 1815–1975. Volume I: The Growth of Mass Democracies and Welfare States. Frankfurt, Germany: Campus Verlag.Google Scholar
Fogel, Robert (1991) The conquest of high mortality and hunger in Europe and America: Timing and mechanisms. In Higgonet, Patrice, Landes, David S., and Rosovsky, Henry (eds.), Favorites of Fortune: Technology, Growth, and Economic Development since the Industrial Revolution, pp. 33–71. Cambridge, MA: Harvard University Press.Google Scholar
Galor, Oded (2005) From stagnation to growth: Unified growth theory. In Aghion, P. and Durlauf, S.N. (eds.), Handbook of Economic Growth, Vol. 1, Part 1, pp. 171–293. Amsterdam: North Holland.Google Scholar
Galor, Oded (2010) 2008 Lawrence R. Klein Lecture–Comparative economic development: Insights from unified growth theory. International Economic Review 51, 1–44.Google Scholar
Galor, Oded (2011) Unified Growth Theory. Princeton, NJ: Princeton University Press.Google Scholar
Galor, Oded (2012) The Demographic Transition: Causes and consequences. Cliometrica 6, 1–28.Google Scholar
Galor, Oded and Moav, Omer (2002) Natural selection and the origin of economic growth. Quarterly Journal of Economics 117, 1133–1191.Google Scholar
Galor, Oded and Moav, Omer (2006) Das human-kapital: A theory of the demise of the class structure. Review of Economic Studies 73, 85–117.Google Scholar
Galor, Oded and Mountford, Andrew (2006) Trade and the Great Divergence: The family connection. American Economic Review 96, 299–303.Google Scholar
Galor, Oded and Mountford, Andrew (2008) Trade and the Great Divergence: Theory and evidence. Review of Economic Studies 75, 1143–1179.Google Scholar
Galor, Oded and Weil, David (2000) Population, technology and growth: From Malthusian stagnation to the Demographic Transition and beyond. American Economic Review 90, 806–828.Google Scholar
Goldin, Claudia (1999) A Brief History of Education in the United States. NBER historical paper 119, National Bureau of Economic Research, Cambridge, MA.Google Scholar
Goldin, Claudia and Katz, Lawrence (2007) The Race Between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005. NBER working paper 12984, National Bureau of Economic Research, Cambridge, MA.Google Scholar
Goldin, Claudia and Katz, Lawrence (2008) The Race between Education and Technology. Boston: Harvard University Press.Google Scholar
Goldstone, Jack (2002) Efflorescences and economic growth in world history: Rethinking the “Rise of the West” and the Industrial Revolution. Journal of World History 13, 323–389.Google Scholar
Hansen, Gary and Prescott, Edward (2002) Malthus to Solow. American Economic Review 92, 1205–1217.CrossRefGoogle Scholar
Heckman, James, Lochner, Lance, and Taber, Christopher (1998) Explaining rising wage inequality: Explorations with a dynamic general equilibrium model of labor earnings heterogenous agents. Review of Economic Dynamics 1, 1–58.Google Scholar
Heijdra, Ben and Ligthart, Jenny (2006) The macroeconomic dynamics of demographic shocks. Macroeconomic Dynamics 10, 349–370.Google Scholar
Horrell, Sara and Humphries, Jane (1995) The exploitation of little children: Child labor and the family economy in the Industrial Revolution. Explorations in Economic History 32, 485–516.Google Scholar
Jacob, Brian and Lefgren, Lars (2007) What do parents value in education? An empirical investigation of parents' revealed preferences for teachers. Quarterly Journal of Economics 122, 1603–1637.Google Scholar
Jones, Chad (2001) Was the Industrial Revolution inevitable? Economic growth over the very long run. Advances in Macroeconomics 1, 1–45.Google Scholar
Jones, Larry and Michele, Tertilt (2006) An economic history of fertility in the U.S.: 1826–1960. In Rupert, Peter (ed.), Frontiers of Family Economics, Vol. 1, pp. 165–230. Bingley, UK: Emerald Group Publishing.Google Scholar
Katz, Lawrence and Autor, David (1999) Changes in the wage structure and earnings inequality. In Ashenfelter, O. and Card, D. (eds.), Handbook of Labor Economics, Vol. 3A, pp. 1463–1555. Amsterdam: Elsevier Science.Google Scholar
Katz, Lawrence and Murphy, Kevin (1992) Changes in relative wages, 1963–87: Supply and demand factors. Quarterly Journal of Economics 107, 35–78.Google Scholar
Keat, Paul (1960) Long-run changes in occupational wage structure, 1900–1956. Journal of Political Economy 68, 584–600.CrossRefGoogle Scholar
Kelly, Morgan, Mokyr, Joel, and O'Grada, Cormac (2011) Precocious Albion: Factor Prices, Technological Change and the British Industrial Revolution. Unpublished paper, University of California, Los Angeles.Google Scholar
Kodde, David and Ritzen, Jozef (1984) Integrating consumption and investment motives in a neoclassical model of demand for education. Kyklos 37, 598–608.Google Scholar
Komlos, John (1990) Nutrition, population growth, and the Industrial Revolution in England. Social Science History 14, 69–91.Google Scholar
Krueger, Alan and Lindahl, Mikael (2001) Education for growth: Why and for whom? Journal of Economic Literature 39, 1101–1136.Google Scholar
Landes, David (1969) The Unbound Prometheus. Technological Change and Industrial Development in Western Europe from 1750 to the Present. Cambridge, UK: Cambridge University Press.Google Scholar
Lebergott, Stanley (1947) Wage structures. Review of Economic Statistics 29, 274–285.Google Scholar
Lindert, Peter and Williamson, Jeffrey (1980) American Inequality: A Macroeconomic History. New York: Academic Press.Google Scholar
Lucas, Robert (2002) The Industrial Revolution: Past and future. In Lectures on Economic Growth. Cambridge, MA: Harvard University Press.Google Scholar
Maoz, Yishay and Moav, Omer (2004) Social stratification, capital–skill complementarity, and the nonmonotonic evolution of the education premium. Macroeconomic Dynamics 8, 295–309.Google Scholar
Michael, Robert (1973) Education in non-market production. Journal of Political Economy 81, 206–227.Google Scholar
Mitch, David (1982) The Spread of Literacy in Nineteenth-Century England. Ph.D. dissertation, University of Chicago.Google Scholar
Mitch, David (1999) The role of education and skill in the first industrial revolution. In Mokyr, Joel (ed.), The British Industrial Revolution: An Economic Perspective, pp. 241–279. Boulder, CO: Westview.Google Scholar
Mokyr, Joel and Voth, Hans-Jochim (2010) Understanding growth in Europe, 1700–1870: Theory and evidence. In The Cambridge Economic History of Modern Europe, Vol. 1, pp. 7–42. Cambridge, UK: Cambridge University Press.Google Scholar
Ober, Harry (1948) Occupational wage differentials, 1907–1947. Monthly Labor Review, 27, 134.Google Scholar
O'Rourke, Kevin, Rahman, Ahmed, and Taylor, Alan (2013) Luddites, the Industrial Revolution, and the Demographic Transition. Journal of Economic Growth 18, 373–409.Google Scholar
Rahman, Ahmed (2013) The road not taken–-what is the “appropriate'' path to development when growth is unbalanced? Macroeconomic Dynamics 17, 747–778.Google Scholar
Schaafsma, Joseph (1976) The consumption and investment aspects of the demand for education. Journal of Human Resources 11, 233–242.Google Scholar
Schofield, Robert (1973) Dimensions of illiteracy, 1750–1850. Explorations in Economic History 10, 437–454.Google Scholar
Schultz, Theodore (1975) The value of the ability to deal with disequilibria. Journal of Economic Literature 13, 827–846.Google Scholar
van Zanden, Jan-Leuten (2009) The skill premium and the “Great Divergence.” European Review of Economic History 13, 121–153.Google Scholar
Voigtlander, Nico and Voth, Hans-Jochim (2006) Why England? Demographic factors, structural change and physical capital accumulation during the Industrial Revolution? Journal of Economic Growth 11, 310–361.Google Scholar
Voth, Hans-Jochim (2003) Living standards during the Industrial Revolution: An economist's guide. American Economic Review Paper and Proceedings 93, 221–226.Google Scholar
West, E.G. (1978) Literacy and the Industrial Revolution. Economic History Review 31, 369–383.Google Scholar
Williamson, Jeffrey (1982) The structure of pay in Britain, 1710–1911. In Uselding, P. (ed.), Research in Economic History, Vol. 7, pp. 1–54. Greenwich, CT: Johnson Associates.Google Scholar
Woytinsky, Wladimir (1953) Employment and Wages in the United States. New York: The Twentieth Century Fund.Google Scholar