Human capital and the switch from agriculture to industry

Endogenous technological change explains the transition from agriculture to industry. Initial production is agricultural. Human capital accumulation causes the economy to switch from agriculture to industry. The model explains slow growth in population and income before a switch to a balanced growth path of higher population growth and rapid income growth. Introducing a human capital externality in the total factor productivity of agriculture and industry allows for the reproduction of the previous outcomes and generates better per capita incomes in 200 and 3000 BC, the onset and duration of an agricultural revolution, time varying market size and modern income differentials. (C) 2002 Elsevier Science B.V. All rights reserved.