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A SIMPLE THEORY OF THE EFFECTS OF INDUSTRIALIZATION

Published online by Cambridge University Press:  06 January 2016

Ahmed S. Rahman
Ahmed S. Rahman*
Affiliation:
United States Naval Academy
*
Address correspondence to: Ahmed S. Rahman, Department of Economics, United States Naval Academy, Annapolis, MD 21402, USA; e-mail: rahman@usna.edu.
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Abstract

Historically, industrialization has been associated with falling relative returns to skills. This fact is at odds with most unified theories of industrialization, which tend to imply rising skill premia as natural concomitants of economic growth. This paper develops a very simple model of historical growth to help solve this puzzle. Assuming that human capital is both a consumption good and an investment good, the model demonstrates how gradually rising investments in human capital, nonmonotonic fertility rates, and falling skill premia can all be explained within one theory.

Keywords

Endogenous DemographySkill PremiumUnified Growth Theory

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Type
Articles
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Macroeconomic Dynamics , Volume 21 , Issue 1 , January 2017 , pp. 106 - 129
Copyright
Copyright © Cambridge University Press 2016 

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