• at the Turn of the Century
  • The 20 th century is a period of great change
  • A History of American Economic Growth in the 20th …

American economic growth in the 20th century was characterized by the rise of the ..



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But trade and globalization may have been more important than traditionally assumed. Trade influences what types of technologies are more profitable to develop. In particular, trade creates a tendency for the price of skill-intensive products to increase. Then, via the price effect emphasized above, the incentives for the introduction of new skill-biased technologies are strengthened. In other words, trade and globalization induce further skill-biased technical change.

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Nevertheless, most economists discount the role of globalization and trade for a variety of reasons. First, the volume of trade is still small. Second, the major intervening mechanism for the trade explanation, a large increase in the relative prices of skill-intensive goods because of greater world demand for these, has not been observed. Third, inequality also has increased in many of the LDCs trading with the United States,whereas the simplest trade and globalization explanations predict a decline in inequality in relatively skill-scarce economies, like the LDCs.


Economic history of the United States - Wikipedia

With this type of induced technical change, trade can have a larger effect on inequality than traditional calculations suggest. Moreover, it can do so without a large impact on the relative prices of skill-intensive goods because the induced technical change will help boost the supply of these goods. As a result, we may not even see much evidence of the original triggering mechanism, the change in relative prices. Finally, to the extent that the LDCs are also using technologies developed in the United States and the OECD, there will be a force towards increasing inequality in those countries as well,counteracting the static equalizing effects of trade in economies with relative skill scarcity.

Another major economic development of the past 30 years is the increased globalization of production, and greater trade between the United States and less developed nations (LDCs). A number of commentators have suggested that globalization and increased trade might be responsible for the rise in U.S. inequality. The arguments above -- that technological change has been important in the rise in inequality -- do not imply that other factors, such as globalization, have not played a major role.

The economic history of the United States is about characteristics ..

What about the secular skill-biased technical change throughout the 20th century? Perhaps there is a natural explanation: the relative supply of skilled workers has been increasing throughout the century, so we should expect steady skill-biased technical change. What about the skill-replacing technologies of the 19th century? One possible,conjectural argument is that the early 19th century was characterized by skill-replacing developments because the increased supply of unskilled workers in the English cities (resulting from migration from rural areas and from Ireland) made the introduction of these technologies profitable. Therefore, a theory of directed technical change provides us with an explanation for: secular skill-biased technical change throughout the 20th century; the rise in inequality over the past several decades; and, possibly, the skill-replacing technologies of the early 19th century.

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In this light, the recent acceleration in the skill bias of technology is potentially response to the rapid increase in the supply of skills starting in the early 1970s. As the market size for skill-complementary technologies such as personal computers or computer-assisted machinery expanded, it became more profitable to create and introduce more such technologies. This hypothesis not only explains the increase in the demand for skills, and the resulting rise in the returns to education and inequality, but also helps us understand the timing of the increase. New technologies take a while to be created and brought to the market. Therefore, the first effect of a large increase in the relative supply of skills might be to move the economy along a downward-sloping constant-technology relative demand curve. However, as new skill-biased technologies are brought to the market, this constant-technology relative demand curve shifts out,increasing returns to education, potentially even beyond its initial level.

The 19th Century World Economy: Major Changes & …

The increase in the demand for skills and inequality in the U.S. economy may be as much attributable to the changes in the organization of production as to the direct effect of new technologies. Today's production relations, how jobs and monitoring are organized, and how firms recruit employees are all very different from 30 years ago.