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Das Human Kapital: A Theory of the Demise of the Class Structure

  • Oded Galor

    (Brown University & Hebrew University)

  • Omer Moav

    (Hebrew University)

This paper hypothesizes that the demise of the 19th century's European class structure reflects a deliberate transformation of society orchestrated by the capitalists. Contrary to conventional wisdom, it argues that the demise of this class structure was an outcome of a cooperative, rather than divisive process. The research suggests that the transition from this class structure may be viewed as the outcome of an optimal reaction by the capitalists to the increasing importance of human capital in sustaining their profit rates. The paper argues that the process of capital accumulation gradually intensified the importance of skilled labor in the production process and generated an incentive for investment in human capital. Due to the complementarity between physical and human capital in production, the capitalists were among the prime beneficiaries of the accumulation of human capital by the masses. They therefore had the incentive to support public education that would sustain their profit rates and would improve their economic well-being, although it would ultimately undermine their dynasty's position in the social ladder. The research suggests that Karl Marx's highly influential prediction about the inevitable class struggle due to declining profit rates stemmed from an under appreciation of the role that human capital would play in the production process. The basic premise of this research, regarding the positive attitude of capitalists towards education reforms, is supported empirically by a newly constructed data set of the voting patterns on England's education reform proposed in the Balfour Act of 1902.

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File URL: http://128.118.178.162/eps/ge/papers/0410/0410003.pdf
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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0410003.

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Length: 49 pages
Date of creation: 05 Oct 2004
Date of revision:
Handle: RePEc:wpa:wuwpge:0410003
Note: Type of Document - pdf; pages: 49
Contact details of provider: Web page: http://128.118.178.162

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  11. Benabou, R., 1996. "Inequality and Growth," Working Papers 96-22, C.V. Starr Center for Applied Economics, New York University.
  12. Field, Alexander James, 1976. "Educational Reform and Manufacturing Development in Mid-Nineteenth Century Massachusetts," The Journal of Economic History, Cambridge University Press, vol. 36(01), pages 263-266, March.
  13. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, National Bureau of Economic Research, Inc.
  14. Grossman, Herschel I, 1994. "Production, Appropriation, and Land Reform," American Economic Review, American Economic Association, vol. 84(3), pages 705-12, June.
  15. Tomes, Nigel, 1981. "The Family, Inheritance, and the Intergenerational Transmission of Inequality," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 928-58, October.
  16. Mulligan, C.B. & Sala-i-Martin, X., 1992. "Transitional Dynamics in Two-Sector Models of Endogenous Growth," Papers 651, Yale - Economic Growth Center.
  17. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
  18. Taylor, Alan M., 1999. "Sources of convergence in the late nineteenth century," European Economic Review, Elsevier, vol. 43(9), pages 1621-1645, October.
  19. Bourguignon, F. & Verdier, T., 1997. "Oligarchy, Democracy, Inequality and Growth," DELTA Working Papers 97-10, DELTA (Ecole normale supérieure).
  20. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
  21. Menchik, Paul L & David, Martin, 1983. "Income Distribution, Lifetime Savings, and Bequests," American Economic Review, American Economic Association, vol. 73(4), pages 672-90, September.
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  23. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1121-66, December.
  24. Lawrence F. Katz & Claudia Goldin, 2001. "The Legacy of U.S. Educational Leadership: Notes on Distribution and Economic Growth in the 20th Century," American Economic Review, American Economic Association, vol. 91(2), pages 18-23, May.
  25. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
  26. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  27. Daron Acemoglu & James A. Robinson, 2000. "Why Did The West Extend The Franchise? Democracy, Inequality, And Growth In Historical Perspective," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1167-1199, November.
  28. Goldin, Claudia, 1999. "Egalitarianism and the Returns to Education during the Great Transformation of American Education," Scholarly Articles 2623652, Harvard University Department of Economics.
  29. Bertocchi, Graziella & Spagat, Michael, 2004. "The evolution of modern educational systems: Technical vs. general education, distributional conflict, and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 559-582, April.
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  31. Maoz, Yishay D & Moav, Omer, 1999. "Intergenerational Mobility and the Process of Development," Economic Journal, Royal Economic Society, vol. 109(458), pages 677-97, October.
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