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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
  • José Tessada
  • Ethan Lewis

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

  • Jeanne Lafortune & José Tessada & Ethan Lewis, 2015. "People and Machines: A Look at the Evolving Relationship Between Capital and Skill In Manufacturing 1860-1930 Using Immigration Shocks," NBER Working Papers 21435, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21435
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    References listed on IDEAS

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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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