DP7045 Luddites and the Demographic Transition

Author(s): Kevin Hjortshøj O'Rourke, Ahmed Rahman, Alan M. Taylor
Publication Date: November 2008
Keyword(s): demography, endogenous growth, unified growth theory
JEL(s): J13, J24, N10, O31, O33
Programme Areas: International Macroeconomics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7045

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.