Luddites And The Demographic Transition

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. The authors 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.