A Tale of Two Skill Premia

Ahmed Rahman

No 8021, Working Papers from Economic History Society

Abstract: "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."

JEL-codes: J11 J31 N33 O33 O41 (search for similar items in EconPapers)
Date: 2008-03
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