Economic growth and economic development 690

Introduction to Modern Economic Growth
such as the factory system and the major spinning and weaving innovations, were
skill-replacing rather than skill-complementary.
Thus, in summary, we have the following stylized facts:
(1) Secular skill-biased technological change increasing the demand for skills
throughout the 20th century.
(2) Possible acceleration in skill-biased technological change over the past 25
years.
(3) A range of important skill-replacing technologies during the 19th century.
The current model, in particular, Propositions 15.3 and 15.4, gives us a way to
think about these issues. In particular, when σ > 2, the long-run (endogenoustechnology) relationship between the relative supply of skills and the skill premium
is positive. With an upward-sloping relative demand curve, or simply with the
degree of skill bias endogenized, we have a natural explanation for all of the patterns
mentioned above.
(1) According to Propositions 15.3 and 15.4, the increase in the number of
skilled workers that has taken place throughout the 20th century should
cause steady skill-biased technical change. Therefore, models of directed
technological change offer a natural explanation for the secular skill-biased
technological developments of the past century.
(2) Acceleration in the increase in the number of skilled workers over the past
25 years, shown in Figure 15.1, should induce an acceleration in skill-biased
technological change. We will also discuss below how this class of models
might account for the dynamics of factor prices in the face of endogenously
changing technologies.
(3) Can the framework also explain the prevalence of skill-replacing/laborbiased technological change in the late 18th and 19th centuries? While
we know less about both changes in relative supplies and technological developments during these historical periods, available evidence suggests that
there were large increases in the number of unskilled workers available to
be employed in the factories during this time periods. Bairoch (1988, p.
676