Working Paper: CEPR ID: DP2701
Authors: Oded Galor; Omer Moav
Abstract: This Paper hypothesizes that the demise of the 19th century's European class structure reflects a deliberate transformation of society orchestrated by the Capitalists. Contrary to conventional wisdom, it argues that the demise of this class structure has been in part an outcome of a cooperative rather than purely a divisive process. The research suggests that the transition from this class structure may be viewed as the outcome of an optimal reaction process of the Capitalists to the increasing importance of human capital in sustaining their profit rates. The Paper argues that the process of capital accumulation has gradually intensified the relative scarcity of labour and has generated an incentive to augment labour via human capital accumulation. Due to the complementarity between physical and human capital in production, the Capitalists were among the prime beneficiaries of the potential accumulation of human capital by the masses. They had therefore the incentive to financially support public education that would sustain their profit rates and would improve their economic well being, although it would ultimately undermine their dynasty's position in the social ladder.
Keywords: class struggle; education; growth; income distribution
JEL Codes: N30; O10; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital accumulation (E22) | relative scarcity of labor (J23) |
| relative scarcity of labor (J23) | human capital accumulation (J24) |
| capitalists' actions (P12) | demise of European class structure (N93) |
| human capital accumulation (J24) | societal changes (O35) |
| capitalists' interests (P12) | support for public education (H52) |
| emergence of human capital (J24) | altered attitudes towards public education (I28) |