Knowledge Economy at the Turn of the Twentieth Century, The: The Emergence of Hierarchies

Innovation and Economic Growth

Article Snapshot


Luis Garicano and Esteban Rossi-Hansberg


Journal of the European Economic Association - Papers and Proceedings, 2006


This paper looks at the demand for managers in the knowledge economy.

Policy Relevance

Communications technology can affect the demand for high-skill workers such as managers.

Main Points

  • Our theory is that changes in communications technology such as the growth of railways and telegraphy lets high and low skill individuals form teams.

  • At first this increases the demand for high-skill workers, who manage low-skill production workers.

  • But if communications technology improves further, fewer managers are needed because a single manager can handle more tasks. The demand for high-skill workers falls.

  • As the nineteenth century ended and the twentieth century began, some data shows support for this theory in wage patterns of low and high-skill workers.

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