Economic growth and economic development 691

Introduction to Modern Economic Growth
245), for example, describes this rapid expansion of the supply of unskilled
labor as follows:
“ ... between 1740 and 1840 the population of England ... went up from
6 million to 15.7 million. ... while the agricultural labor force represented
60-70% of the total work force in 1740, by 1840 it represented only 22%.”
Habakkuk’s authoritative account of 19th-century technological development (pp. 136-137) also emphasizes the increase in the supply of unskilled
labor in English cities, and attributes it to five sources. First, enclosures
released substantial labor from agriculture. Second, “population was increasing very rapidly” (p. 136). Third, labor reserves of rural industry
came to the cities. Fourth, “there was a large influx of labor from Ireland”
(p. 137). Finally, “technical changes in agriculture increased the supply
of labor available to industry” (p. 137). According to our model of directed technological change, this increase in the relative supply of unskilled
labor should have encouraged unskill-biased technical change, and this is
consistent with the patterns discussed above.

In addition to accounting for the recent skill-biased technological developments
and for the historical technologies that appear to have been biased towards unskilled
workers, this framework also gives a potential interpretation for the dynamics of the
college premium during the 1970s and 1980s. It is reasonable to presume that the
equilibrium skill bias of technologies, NH /NL , is a sluggish variable determined by
the slow buildup and development of new technologies (as the analysis of transitional
dynamics in Proposition 15.2 shows). In this case, a rapid increase in the supply of
skills would first reduce the skill premium as the economy would be moving along
a constant technology (constant NH /NL ) curve as shown in Figure 15.4. After
a while technology would start adjusting, and the economy would move back to
the upward sloping relative demand curve, with a relatively sharp increase in the
college premium. This approach can therefore explain both the decline in the college
premium during the 1970s and its subsequent large surge, and relates both of these
phenomena to the large increase in the supply of skilled workers.
677