Why are a Third of People Indian and Chinese? Trade, Industrialization and Demographic Transition

46 Pages Posted: 5 Feb 2002

See all articles by Oded Galor

Oded Galor

Brown University - Department of Economics; Centre for Economic Policy Research (CEPR)

Andrew Mountford

Royal Holloway, University of London

Date Written: January 2002

Abstract

This research argues that international trade has played a significant role in the timing of demographic transitions across countries and has thereby been a major determinant of the distribution of world population and a prime cause of sustained differences in population growth and income levels across countries. In industrial economies international trade enhanced the specialization in the production of skilled-intensive goods and stimulated technological progress. The rise in the demand for skilled labor induced an investment in the quality of the population, expediting the demographic transition, stimulating technological progress and further enhancing the comparative advantage of these industrial economies in the production of skilled intensive goods. In non-industrial economies, in contrast, the specialization in the production of unskilled-intensive goods that was brought about by international trade reduced the demand for skilled labor and provided limited incentives to invest in population quality. The demographic transition was therefore delayed, increasing further the abundance of unskilled labor in these economies and enhancing their comparative disadvantage in the production of skilled intensive goods. International trade has therefore widened the gap between the technological level as well as the skill abundance of industrial and non-industrial economies, enhancing the initial patterns of comparative advantage and generating sustained differences in income per capita across countries.

Keywords: International trade, demographic transition, industrial revolution, growth, human capital

JEL Classification: F11, F43, N30, O40

Suggested Citation

Galor, Oded and Mountford, Andrew, Why are a Third of People Indian and Chinese? Trade, Industrialization and Demographic Transition (January 2002). CEPR Discussion Paper No. 3136. Available at SSRN: https://ssrn.com/abstract=298279

Oded Galor (Contact Author)

Brown University - Department of Economics ( email )

Providence, RI 02912
United States

HOME PAGE: http://www.econ.brown.edu/fac/Oded_Galor/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://www.econ.brown.edu/fac/Oded_Galor/

Andrew Mountford

Royal Holloway, University of London ( email )

Royal Holloway, University of London
Egham
Surrey TW20 0EX
United Kingdom
+44 1784 443 906 (Phone)
+44 1784 439 534 (Fax)

HOME PAGE: http://personal.rhul.ac.uk/uhte/023/

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