DP7045 Luddites and the Demographic Transition

Author(s): Kevin H. 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

Initiatives: Economic History

Link to this Page: www.cepr.org/pubs/dps/DP7045.asp.asp

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.