Inequality and Industrialization

Abstract

Why do some countries industrialize later than others? Recent literature suggests that the prime reason is low agricultural productivity. This paper argues that the initial inequality of human capital could also be a contributing factor to the delayed process of industrialization characterizing some countries. We develop a neo-classical growth model which predicts that countries with a greater initial knowledge gap between rich and poor agents industrialize slowly, and that human capital inequality, although declining, tends to be persistent. Our cross-country data lend support to these predictions.