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The Resolution of the Labor Scarcity Paradox

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  • John A. James
  • Jonathan S. Skinner

Abstract

This paper reconciles the apparently contradictory evidence about American and British technology in the first half of the nineteenth century. Past studies have focused on the writings of a number of distinguished British engineers, who toured the United States during the 1850s and commented extensively on the highly mechanized state of the manufacturing sector. Other studies, however, have marshalled evidence that the interest rate was higher, and the aggregate manufacturing capital stock was lower, in the United States relative to Britain. We resolve this paradox by noting that British engineers were most impressed by only a few industries which relied on skilled workers. Using the 1849 Census of Manufactures, we estimate separate production functions for the skilled sector and for the remaining, less skilled manufacturing sector. We find strong relative complementarity between capital and natural resources in the skilled sector, and relative substitutability between skilled labor and capital. Using these parameters in a computable general equilibrium model of the U.S. and British economies indicates greater capital intensity (or labor scarcity) in the skilled manufacturing sector, but overall capital scarcity and higher interest rates, in the U.S. relative to Britain.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1504.

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Date of creation: Nov 1984
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Publication status: published as James, John A. and Jonathan S. Skinner. "The Resolution of the Labor Scarcity Paradox," Journal of Economic History, Vol. 45, No. 3, (September 1985) pp. 513-540.
Handle: RePEc:nbr:nberwo:1504

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  1. Lindert, Peter H. & Williamson, Jeffrey G., 1982. "Antebellum Wage Widening Once Again," The Journal of Economic History, Cambridge University Press, vol. 42(02), pages 419-422, June.
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  4. Goldin, Claudia & Sokoloff, Kenneth, 1982. "Women, Children, and Industrialization in the Early Republic: Evidence from the Manufacturing Censuses," Scholarly Articles 2664292, Harvard University Department of Economics.
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  7. Kenneth L . Sokoloff, 1983. "Investment in Fixed and Working Capital During Early Industrialization: Evidence from U.S. Manufacturing Firms," UCLA Economics Working Papers 311, UCLA Department of Economics.
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  12. Mundlak, Yair, 1978. "Occupational Migration out of Agriculture-A Cross-Country Analysis," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 392-98, August.
  13. Alexander James Field, 1980. "Industrialization and Skill Intensity: The Case of Massachusetts," Journal of Human Resources, University of Wisconsin Press, vol. 15(2), pages 149-175.
  14. Fogel, Robert William, 1967. "The Specification Problem in Economic History," The Journal of Economic History, Cambridge University Press, vol. 27(03), pages 283-308, September.
  15. Brito, D. L. & Williamson, Jeffrey G., 1973. "Skilled labor and nineteenth century Anglo-American managerial behavior," Explorations in Economic History, Elsevier, vol. 10(3), pages 235-251.
  16. R. A. Church, 1975. "Nineteenth-Century Clock Technology in Britain, the United States, and Switzerland," Economic History Review, Economic History Society, vol. 28(4), pages 616-630, November.
  17. Lazonick, William H., 1981. "Production Relations, Labor Productivity, and Choice of Technique: British and U.S. Cotton Spinning," The Journal of Economic History, Cambridge University Press, vol. 41(03), pages 491-516, September.
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  19. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
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