DP1413 Technological Progress, Mobility, and Economic Growth

Author(s): Oded Galor, Daniel Tsiddon
Publication Date: June 1996
Keyword(s): Earnings Mobility, Growth, Human Capital, Income Distribution, Inequality, Overlapping-generations
JEL(s): D31, J62, O40
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1413

This paper analyses the relationship between technological progress, intergenerational earnings mobility, and economic growth. The analysis demonstrates that the interplay between technological progress and two components that determine individual earnings ? parental human capital and individual ability ? governs mobility, technological progress, and economic growth. In periods of major technological inventions the ability effect is the dominating factor. The decline in the relative importance of initial parental conditions (i.e. the driving force behind the persistence of inequality) enhances mobility and generates a larger concentration of high-ability individuals in technologically-advanced sectors, stimulating further technological progress and economic growth. Once existing technologies become more accessible, however, mobility is diminished and inequality becomes more persistent. The reduction in the concentration of human capital in technologically-advanced sectors diminishes the likelihood of major technological breakthroughs and slows down future economic growth. User friendliness, therefore, becomes unfriendly to future economic growth.