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Elite Education, Mass Education, and the Transition to Modern Growth

We propose an innovation-driven growth model in which education is determined by family background and cognitive ability. We show that compulsory schooling can move a society from elite education to mass education, which then triggers market R&D. This means that our model rationalizes two different paths to modern growth: According to the Prussian way, compulsory education is implemented first and triggers the onset of market R&D. According to the British way, market R&D is initiated without mass education, which is triggered later by technical progress and economic development.