People and Machines: A Look at the Evolving Relationship between Capital and Skill in Manufacturing, 1860–1930, Using Immigration Shocks

Jeanne Lafortune, Ethan Lewis and José Tessada
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Ethan Lewis: Dartmouth College and NBER

The Review of Economics and Statistics, 2019, vol. 101, issue 1, 30-43

Abstract: Abstract This paper estimates the elasticity of substitution between capital and skill in manufacturing using immigration-induced variation in skill mix across U.S. counties between 1860 and 1930. We find that capital initially complemented both high- and low-skill labor (determined by literacy) and, unlike today, was more complementary with low-skill labor. Around 1890, capital increased its relative complementarity with high-skill labor. Simulations calibrated to our estimates imply the level of capital-skill complementarity after 1890 allowed the manufacturing sector to absorb the large wave of Eastern and Southern European immigrants with only a modest decline in less-skilled relative wages. This would not have been possible under the older production technology.

Date: 2019
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Related works:
Working Paper: People and Machines A Look at the Evolving Relationship Between Capital and Skill In Manufacturing 1860-1930 Using Immigration Shocks (2015)
Working Paper: People and Machines: A Look at the Evolving Relationship Between Capital and Skill in Manufacturing 1860-1930 Using Immigration Shocks (2015)
Working Paper: People and Machines: A Look at the Evolving Relationship Between Capital and Skill In Manufacturing 1860-1930 Using Immigration Shocks (2015)
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