Sunday, July 27, 2014

Human Capital

Human Capital and Industrialization: Evidence from the Age of Enlightenment 

Mara Squicciarini & Nico Voigtländer 
NBER Working Paper, June 2014 

Abstract: While human capital is a strong predictor of economic development today, its importance for the Industrial Revolution is typically assessed as minor. To resolve this puzzling contrast, we differentiate average human capital (worker skills) from upper tail knowledge both theoretically and empirically. We build a simple spatial model, where worker skills raise the local productivity in a given technology, while scientific knowledge enables local entrepreneurs to keep up with a rapidly advancing technological frontier. The model predicts that the local presence of knowledge elites is unimportant in the pre-industrial era, but drives growth thereafter; worker skills, in contrast, are not crucial for growth. To measure the historical presence of knowledge elites, we use city-level subscriptions to the famous Encyclopédie in mid-18th century France. We show that subscriber density is a strong predictor of city growth after 1750, but not before the onset of French industrialization. Alternative measures of development confirm this pattern: soldier height and industrial activity are strongly associated with subscriber density after, but not before, 1750. Literacy, on the other hand, does not predict growth. Finally, by joining data on British patents with a large French firm survey from 1837, we provide evidence for the mechanism: upper tail knowledge raised the productivity in innovative industrial technology. 

Nod to Kevin Lewis

1 comment:

Jim Oliver said...

Seems like evidence of signaling theory of education.