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The Resolution of the Labor-Scarcity Paradox

Listed author(s):
  • James, John A.
  • Skinner, Jonathan S.

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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Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 45 (1985)
Issue (Month): 03 (September)
Pages: 513-540

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Handle: RePEc:cup:jechis:v:45:y:1985:i:03:p:513-540_03
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  1. Drummond, Ian M., 1967. "Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's: A Comment," The Journal of Economic History, Cambridge University Press, vol. 27(03), pages 383-390, September.
  2. Claudia Goldin & Kenneth Sokoloff, 1981. "Women, Children, and Industrialization in the Early Republic: Evidence from the Manufacturing Censuses," UCLA Economics Working Papers 220, UCLA Department of Economics.
  3. Temin, Peter, 1966. "Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's," The Journal of Economic History, Cambridge University Press, vol. 26(03), pages 277-298, September.
  4. Williamson, Jeffrey G., 1982. "Was the industrial revolution worth it? Disamenities and death in 19th century British towns," Explorations in Economic History, Elsevier, vol. 19(3), pages 221-245, July.
  5. 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.
  6. Daniel S. Hamermesh & James Grant, 1979. "Econometric Studies of Labor-Labor Substitution and Their Implications for Policy," Journal of Human Resources, University of Wisconsin Press, vol. 14(4), pages 543-562.
  7. Kenneth L. Sokoloff, 1984. "Investment in Fixed and Working Capital During Early Industrialization: Evidence From U.S. Manufacturing Firms," NBER Working Papers 1385, National Bureau of Economic Research, Inc.
  8. Mundlak, Yair & Strauss, John, 1978. "Occupational migration out of agriculture in Japan," Journal of Development Economics, Elsevier, vol. 5(1), pages 55-71, March.
  9. 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.
  10. Christensen, Paul P., 1981. "Land abundance and cheap horsepower in the mechanization of the antebellum United States economy," Explorations in Economic History, Elsevier, vol. 18(4), pages 309-329, November.
  11. 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.
  12. 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.
  13. Mundlak, Yair, 1978. "Occupational Migration out of Agriculture-A Cross-Country Analysis," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 392-398, August.
  14. 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.
  15. Zabler, Jeffrey F., 1972. "Further evidence on American wage differentials, 1800-1830," Explorations in Economic History, Elsevier, vol. 10(1), pages 109-117.
  16. Burgess, David F., 1975. "Duality theory and pitfalls in the specification of technologies," Journal of Econometrics, Elsevier, vol. 3(2), pages 105-121, May.
  17. James, John A., 1978. "The welfare effects of the antebellum tariff: A general equilibrium analysis," Explorations in Economic History, Elsevier, vol. 15(3), pages 231-256, July.
  18. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-468, November.
  19. 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.
  20. Harley, C. K., 1974. "Skilled labour and the choice of technique in Edwardian industry," Explorations in Economic History, Elsevier, vol. 11(4), pages 391-414.
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