Human Capital and Industrialization: The Case of a Latecomer — Portugal, 1890

This chapter touches on two inter-related debates in contemporary economic history concerning the role of human capital in economic growth. The first is the question of whether the early stages of the industrialization process were characterized essentially by a substitution of capital and unskilled labour, for skilled labour and therefore by a low degree of complementarity between technology (usually proxied in the literature by fixed capital) and human capital. The conventional view is that it was indeed a de-skilling process and that there was a high degree of substitutability between physical and human capital. The second debate arises from the consensus among growth economists that human capital is an important factor of growth in the long run and has been responsible for a good deal of convergence between economies (Abramovitz 1993). However, given the concurrent view about the limited importance of human capital in the Industrial Revolution, this has led many to accept the notion that this could not have happened during the nineteenth century but only during the twentieth century. Goldin and Katz (1998; 2000) and Goldin (2001) have tried to give substance to this argument with the claim that the reason for this secular transition has to do with the evolving nature of technology.