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People and Machines: A Look at the Evolving Relationship between Capital and Skill in Manufacturing, 1860–1930, Using Immigration Shocks

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Listed:
  • Jeanne Lafortune

    (Pontificia Universidad Católica de Chile and EH-Clio Lab UC)

  • Ethan Lewis

    (Dartmouth College and NBER)

  • José Tessada

    (Pontificia Universidad Católica de Chile and EH-Clio Lab UC)

Abstract

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.

Suggested Citation

  • Jeanne Lafortune & Ethan Lewis & José Tessada, 2019. "People and Machines: A Look at the Evolving Relationship between Capital and Skill in Manufacturing, 1860–1930, Using Immigration Shocks," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 30-43, March.
  • Handle: RePEc:tpr:restat:v:101:y:2019:i:1:p:30-43
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    Cited by:

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    2. Xie, Bin, 2017. "The Effects of Immigration Quotas on Wages, the Great Black Migration, and Industrial Development," IZA Discussion Papers 11214, Institute of Labor Economics (IZA).
    3. Wei, Hao & Zhou, Yaru, 2023. "The impact of international talent on environmental pollution: Firm-level evidence from China," Energy Economics, Elsevier, vol. 125(C).
    4. Gray, Rowena & Montresor, Giulia & Wright, Greg C., 2020. "Processing immigration shocks: Firm responses on the innovation margin," Journal of International Economics, Elsevier, vol. 126(C).
    5. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 625-685, Elsevier.
    6. Charlotte Bartels & Felix Kersting & Nikolaus Wolf, 2021. "Testing Marx. Income inequality, concentration, and socialism in late 19th century Germany," Working Papers 0211, European Historical Economics Society (EHES).
    7. Uwe Blien & Oliver Ludewig & Anja Rossen, 2023. "Contradictory effects of technological change across developed countries," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 580-608, May.
    8. Youssef Benzarti & Jarkko Harju, 2021. "Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production," Journal of the European Economic Association, European Economic Association, vol. 19(5), pages 2737-2764.
    9. Ager, Philipp & Hansen, Casper Worm, 2017. "Closing Heaven's Door: Evidence from the 1920s U.S. Immigration Quota Acts," Discussion Papers on Economics 11/2017, University of Southern Denmark, Department of Economics.
    10. Wu, Ziqi & Xiao, Yi & Zhang, Jian, 2022. "Labor mobility and corporate investment—Evidence from a Quasi-natural experiment in China," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1110-1129.
    11. Javier Silvestre & John E. Murray, 2023. "Determinants in the adoption of a non-labor-substitution technology: mechanical ventilation in West Virginia coal mines, 1898–1907," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 17(3), pages 467-500, September.
    12. Burchardi, Konrad & Terry, Stephen & Chaney, Thomas & Tarquinio, Lisa & Hassan, Tarek, 2020. "Immigration, Innovation, and Growth," CEPR Discussion Papers 14719, C.E.P.R. Discussion Papers.
    13. Tabellini, Marco & Alesina, Alberto, 2020. "The Political Effects of Immigration: Culture or Economics?," CEPR Discussion Papers 15486, C.E.P.R. Discussion Papers.
    14. Morales, Juan S., 2018. "The impact of internal displacement on destination communities: Evidence from the Colombian conflict," Journal of Development Economics, Elsevier, vol. 131(C), pages 132-150.
    15. Michael A. Clemens, 2022. "Migration on the Rise, a Paradigm in Decline: The Last Half-Century of Global Mobility," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 257-261, May.
    16. David Andersson & Mounir Karadja & Erik Prawitz, 2022. "Mass Migration and Technological Change," Journal of the European Economic Association, European Economic Association, vol. 20(5), pages 1859-1896.
    17. Kirk Doran & Chungeun Yoon, 2019. "Immigration and Invention: Does Language Matter?," NBER Chapters, in: The Roles of Immigrants and Foreign Students in US Science, Innovation, and Entrepreneurship, pages 123-145, National Bureau of Economic Research, Inc.
    18. Eriksson, Katherine & Ward, Zachary, 2022. "Immigrants and cities during the age of mass migration," Regional Science and Urban Economics, Elsevier, vol. 94(C).
    19. Ifft, Jennifer & Jodlowski, Margaret, 2022. "Is ICE freezing US agriculture? Farm-level adjustment to increased local immigration enforcement," Labour Economics, Elsevier, vol. 78(C).

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • N61 - Economic History - - Manufacturing and Construction - - - U.S.; Canada: Pre-1913
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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