Factor Endowments and the Returns to Skill: New Evidence from the American Past
AbstractThe existing literature on skill-biased technical change has not considered how the technological endowment itself plays a role in the returns to skill. This paper constructs a simple model of skill biased technical change which highlights the role that resource endowments play in the returns to education. The model predicts variation in returns to education with skill biased technological change if there is significant heterogeneity in resource endowments before the technological change. Using a variety of historical sources, we document the heterogeneous technology levels by region in the American past. We then estimate the returns to education of high school teachers in the early twentieth century using a new data source. a report from the U.S. Commissioner of Education in 1909. Overall, we find significant regional variation in the returns to education that match differences in resource endowments, with large (within-occupation) returns for the Midwest and Southwest (7%), but much lower returns in the South (3%) and West (0.5%). We also show that our results are generalizable to returns to education in the United States and that returns to education for teachers tracked quite closely with the overall returns to education from 1940 onward.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13589.
Date of creation: Nov 2007
Date of revision:
Note: DAE LS
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Other versions of this item:
- Joseph P. Kaboski & Trevon D. Logan, 2011. "Factor Endowments and the Returns to Skill: New Evidence from the American Past," Journal of Human Capital, University of Chicago Press, vol. 5(2), pages 111 - 152.
- I2 - Health, Education, and Welfare - - Education
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-17 (All new papers)
- NEP-EDU-2007-11-17 (Education)
- NEP-HRM-2007-11-17 (Human Capital & Human Resource Management)
- NEP-LAB-2007-11-17 (Labour Economics)
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