People and Machines: A Look at the Evolving Relationship between Capital and Skill in Manufacturing, 1860–1930, Using Immigration Shocks
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.
- DOI
- 10.1162/rest_a_00775
- Volume
- 101 (1)
- Pages
- 30-43
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref