Working Papers

 

A Tale of Two Skill-Premia (February 2008)

The paper proposes a theory of demography that helps chart the evolution of skill premia both in England during its first and second Industrial Revolutions, and in the American 20th century.  Skill-premia fell in England during the first Industrial Revolution to below 50%, staying below 50% through the entire 19th century, and fell in the U.S. during the first half of the 20th century.  These facts are at odds with most theories of industrialization, which tend to imply rising premia as natural concomitants to economic growth.  I develop a simple model of economic demography to help solve this puzzle.  Conjecturing that households wished to maximize both their levels of income and the levels of education of their children, I demonstrate how rising education levels, non-monotonic fertility rates, and falling skill premia can all be explained within one theory.

 

Luddites and the Demographic Transition (with K. O'Rourke and A. Taylor, February 2008)

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 react to the profit-maximizing decisions of innovators. Endowments dictated that the initial stages of
the Industrial Revolution be unskilled-labor biased. Growth in "Baconian knowledge" allowed both for the takeoff of the Industrial Revolution and the transition to skill-biased technological change. Simulations show that the model does a good job of
tracking the industrialization of Western Europe during the 18th and 19th centuries.

 

Fighting the Forces of Gravity - Sea Power and Maritime Trade between the 18th and 20th Centuries (January 2008)

Have conflicts among naval powers hurt international trade?  Using a panel gravity model, we investigate the interactions of war, naval power and merchant trade from the 18th to mid-20th centuries . We find that wars involving naval powers considerably limit inter-state commerce. Further, we split this effect on trade between an extensive effect (the effect on a country's trade when fighting a naval power) and an intensive effect (the effect of that power gaining more naval strength). We conclude that the intensive effect is a powerful one - that is, naval strength has historically been a destroyer of trade when mobilized to combat. - [EHES slides]

 

Trade, Knowledge and the Industrial Revolution (NBER working paper #13057, with K. O'Rourke and A. Taylor, April 2007)

The paper develops a theory to explain the sequential timing of the Industrial and Demographic Revolutions and the emergence of modern economic growth.  Industrialization occurred in a few core countries between 1760 and 1860, but a decline in fertility only appeared on a large scale in Europe as late as the 1870s.  A model is needed to combine both elements as a convincing model of 18th - 20th century growth.  We construct a trade/growth model that includes both biased technologies and endogenous fertility.  We argue that the Industrial Revolution was a sequence of unskilled-labor intensive innovations that initially incited fertility increases and limited human capital formation.  We further argue that globalization forces in the late 19th century played a role in triggering the demographic transition and the subsequent Great Divergence.

 

The Convergence Implications of Biased Technological Diffusion (January 2007)

The paper proposes a model of a developing economy that endogenizes both technological biases and demographic trends.  As knowledge diffuses from outside regions, potential innovators decide which local technologies to develop after considering the evolution of demographics, and individuals decide the quality and quantity of their children after considering the evolution of technologies.  This allows for multiple growth paths - some economies develop labor-intensive techniques and expand the pool of unskilled labor; others grow into societies of highly-skilled individuals and expanding outputs per capita.  I find that if developing countries wish to achieve good prospects for income convergence, they should promote the flow of knowledge from the most developed regions, even if this results initially in a technology-skill mismatch.  Such knowledge flows are more likely to promote the twin growths in human capital and technologies characteristic of the biggest economic success stories.

 

Global Knowledge and Local Inequality - Industry Level Evidence (November 2006)

This paper attempts to ascertain if skill-biased technologies developed in R&D-active countries diffuse to the rest of the world. First, using a model of international trade, I show the effects of skill-bias knowledge diffusion. The theory suggests that skill-biased technological diffusion need not increase skill premia, as sectoral biases can exert countervailing forces. Second, I test implications from the theory using United Nations industry data. Skill-biased knowledge diffusion tends to be associated with rising local skill-premia more in skill-intensive industries than unskill-intensive ones. Thus sectoral biases can help us see the extent of such technological spillovers.

 

Technological Progress and the U.S. Navy During the Age of Steam (work in progress)

 

Trade, Technology and the Great Divergence (with K. O'Rourke and A. Taylor, work in progress)

 

The Price of Being New - Keeping Up with the Jones in Product Quality (work in progress)

 

Comments always welcome.  Email at rahman@usna.edu