This analysis, co-authored by William Maloney and Felipe Valencia Caicedo, was originally published on VoxEU, an economic-policy website of the Centre for Economic Policy Research.

Abstract: The generation and diffusion of scientific knowledge and technology are assumed to be drivers of modern economic growth, but there is a lack of firm empirical evidence of this. This column uses the first detailed data on the density of engineers in the western hemisphere to argue that historical differences in innovative capacity, as captured by the density of engineers in 1880, explain a significant fraction of the Great Divergence. The results confirm the imperative of developing higher-order human capital.

The generation and diffusion of scientific knowledge and technology are fundamental drivers of modern economic growth. Authors agree that human capital is an important part of the innovative capacity required to facilitate this process, but it is not clear which type of human capital is most important. Some have argued for literacy, secondary, or tertiary education, while others stress higher-order technical skills (Goldin and Katz 2009). In his classic article on endogenous growth, Romer (1990) puts the research engineer at centre stage. From a historical perspective, Mokyr (2005) decides that scientifically minded and engineering-minded technicians were instrumental in industrialisation. These so-called ‘upper tails of knowledge’ are thought to have been particularly important during the second Industrial Revolution between 1870 and 1914.

The lack of systematic historical data on either the prevalence or impact of engineers on income has made it hard to confirm empirically the importance of these skills. Conceptually, Murphy et al. (1991) argue for the importance for modern growth of engineering, compared to less productive professionals such as lawyers. More recently, Cantoni and Yutchman (2014) show higher growth closer to medieval universities, and Squicciarini and Voigtländer (2015) relate faster French industrialisation in 1750 to Encyclopedie subscriptions. To date, however, neither the historical prevalence of Romer’s research engineers nor Mokyr’s engineers and mechanics have been quantified in a globally comparable form. In our recent work (Maloney and Valencia Caicedo 2017), we argue that historical differences in innovative capacity, as captured by the density of engineers in 1880, explain a significant fraction of the Great Divergence in the Western Hemisphere as documented by Galor (2011), among others.

Density of engineers in 1900

Our initial contribution to the debate has been through data collection. We have created the first systematic information on the density of engineers at the country level – and additionally for the US and Americas at the state or county level – for the western hemisphere. Geolocated patenting density data for the US allow us to tease out innovative versus adoptive capacity (as posited by Mokyr 1992). We control for other levels of education that, as mentioned before, may also have been important, including basic literacy, secondary schooling, college attendance, and the presence of other high-level professions such as lawyers and physicians.