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.

An important class of active labor market policy has received little impact evaluation: immigration barriers intended to raise wages and employment by shrinking labor supply. Theories of endogenous technical advance raise the possibility of limited or even perverse impact. We study a natural policy experiment: the exclusion of almost half a million Mexican bracero farm workers from the United States to improve farm labor market conditions. With novel labor market data we measure state-level exposure to exclusion, and model the absent changes in technology or crop mix. We fail to reject zero labor market impact, inconsistent with this model.