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Technological Progress, Mobility, and Economic Growth

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  • Oded Galor
  • Daniel Tsiddon

Abstract

This paper analyses the relationship between technological progress, earnings inequality, the transmission of inequality across generations, and economic growth. The analysis demonstrates that the interplay between technological progress and two components that determine individual earnings - parental specic human capital and individual ability - governs the evolutionary patterns of wage inequality, intergenerational earnings mobility, the pace of technological progress, and economic growth. In periods of major technological inventions the ability e ect is the dominating factor and earnings inequality rises. The decline in the relative importance of initial parental conditions (i.e., the driving force behind the persistence of inequality) enhances mobility and generates a larger concentration of individuals with high levels of ability and human capital in technologically advanced sectors, stimulating further technological progress and future economic growth. In periods of technological innovations, however, once existing technologies become more accessible, the parental specic human capital e ect is the dominating factor, mobility is diminished and inequality declines but becomes more persistent. The reduction in the concentration of human capital in technologically advanced sectors diminishes the likelihood of major technological breakthroughs and slows down future economic growth. User friendliness, therefore, becomes unfriendly to future economic growth.

Suggested Citation

  • Oded Galor & Daniel Tsiddon, 1996. "Technological Progress, Mobility, and Economic Growth," Working Papers 1996-31, Brown University, Department of Economics.
    • Handle: RePEc:bro:econwp:96-31
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