Working Paper: NBER ID: w13057
Authors: Kevin H. O'Rourke; Ahmed S. Rahman; Alan M. Taylor
Abstract: Technological change was unskilled-labor-biased during the early Industrial Revolution of the late eighteenth and early nineteenth centuries, but is skill-biased today. This fact is not embedded in extant unified growth models. We develop a model of the transition to sustained economic growth which can endogenously account for both these facts, by allowing the factor bias of technological innovations to reflect the profit-maximising decisions of innovators. Endowments dictated that the initial stages of the Industrial Revolution be unskilled-labor biased. The transition to skill-biased technological change was due to a growth in "Baconian knowledge" and international trade. Simulations show that the model does a good job of tracking reality, at least until the mass education reforms of the late nineteenth century.
Keywords: Trade; Industrial Revolution; Technological Change; Labor Market Dynamics
JEL Codes: F15; J13; J24; N10; O31; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| baconian knowledge (B12) | skill-biased technological change (J24) |
| international trade (F19) | skill-biased technological change (J24) |
| unskilled-labor biased technological innovations (F66) | decline in skill premium for skilled workers (F66) |
| skill-biased technological change (J24) | increase in demand for skilled labor (J24) |
| growth of baconian knowledge (B12) | development of applied knowledge (O36) |
| development of applied knowledge (O36) | technological advancements favoring skilled labor (J24) |
| technological change (O33) | demographic factors (J11) |
| demographic factors (J11) | technological change (O33) |