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People and Machines: A Look at the Evolving Relationship Between Capital and Skill in Manufacturing 1860-1930 Using Immigration Shocks

Author

Listed:
  • Lafortune, Jeanne

    (Pontificia Universidad Catolica de Chile)

  • Tessada, José

    (Pontificia Universidad Catolica de Chile)

  • Lewis, Ethan Gatewood

    (Dartmouth College)

Abstract

This paper estimates the elasticity of substitution between capital and skill using variation across U.S. counties in immigration-induced skill-mix changes between 1860 and 1930. We find that capital began as a q-complement for skilled and unskilled workers, and then dramatically increased its relative complementary with skilled workers around 1890. Simulations of a parametric production function calibrated to our estimates imply the level of capital-skill complementarity after 1890 likely allowed the U.S. economy to absorb the large wave of less-skilled immigration with a modest decline in less-skilled relative wages. This would not have been possible under the older production technology.

Suggested Citation

  • Lafortune, Jeanne & Tessada, José & Lewis, Ethan Gatewood, 2015. "People and Machines: A Look at the Evolving Relationship Between Capital and Skill in Manufacturing 1860-1930 Using Immigration Shocks," IZA Discussion Papers 9217, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp9217
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    References listed on IDEAS

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    Keywords

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    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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