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Capital Deepening in American Manufacturing, 1850-1880

  • Jeremy Atack
  • Fred Bateman
  • Robert A. Margo

We use establishment-level data to study capital deepening -- increases in the capital-output ratio -- in American manufacturing from 1850 to 1880. In nominal terms, the aggregate capital-output ratio in our samples rose by 30 percent from 1850 to 1880. Growth in real terms was considerably greater -- 70 percent -- because prices of capital goods declined relative to output prices. Cross-sectional regressions suggest that capital deepening was especially importnat in the larger firms and was positively associated with the diffusion of steam-powered machinery. However, even after accounting for shifts over time in such factors, much of the capital deepening remains to be explained. Although capital deepening implies a fall in the average product of capital it does not necessarily imply that rates of return were declining. However, we find strong evidence that returns did decline. We also show that returns were decreasing in firm size, although the data are not sufficiently informative to tell us why it was so.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9923.

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Date of creation: Aug 2003
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Publication status: published as Atack, Jeremy, Fred Bateman and Robert A. Margo. "Capital Deepening And The Rise Of The Factory: The American Experience During The Nineteenth Century," Economic History Review, 2005, v58(3,Aug), 586-595.
Handle: RePEc:nbr:nberwo:9923
Note: DAE
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  1. Atack, Jeremy & Bateman, Fred & Margo, Robert A., 2004. "Skill Intensity and Rising Wage Dispersion in Nineteenth-Century American Manufacturing," The Journal of Economic History, Cambridge University Press, vol. 64(01), pages 172-192, March.
  2. Brown, Martin & Philips, Peter, 1986. "Craft Labor and Mechanization in Nineteenth-Century American Canning," The Journal of Economic History, Cambridge University Press, vol. 46(03), pages 743-756, September.
  3. Jeremy Atack & Fred Bateman & Robert A. Margo, 2001. "Part-Year Operation in Nineteenth Century American Manufacturing: Evidence from the 1870 and 1880 Censuses," Vanderbilt University Department of Economics Working Papers 0106, Vanderbilt University Department of Economics, revised Mar 2001.
  4. Robert E. Gallman, 1986. "The United States Capital Stock in the Nineteenth Century," NBER Chapters, in: Long-Term Factors in American Economic Growth, pages 165-214 National Bureau of Economic Research, Inc.
  5. Kenneth L. Sokoloff & Georgia C. Villaflor, 1992. "The Market for Manufacturing Workers during Early Industrialization: The American Northeast, 1820 to 1860," NBER Chapters, in: Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel, pages 29-65 National Bureau of Economic Research, Inc.
  6. 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.
  7. 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.
  8. Atack, Jeremy, 1977. "Returns to scale in antebellum United States manufacturing," Explorations in Economic History, Elsevier, vol. 14(4), pages 337-359, November.
  9. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins Of Technology-Skill Complementarity," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 693-732, August.
  10. Robert A. Margo, 1992. "The Labor Force in the Nineteenth Century," NBER Historical Working Papers 0040, National Bureau of Economic Research, Inc.
  11. Calomiris, Charles W. & Hanes, Christopher, 1994. "Consistent Output Series for the Antebellum and Postbellum Periods: Issues and Preliminary Results," The Journal of Economic History, Cambridge University Press, vol. 54(02), pages 409-422, June.
  12. Margo, Robert A., 2000. "Wages and Labor Markets in the United States, 1820-1860," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226505077.
  13. Howard Bodenhorn & Hugh Rockoff, 1992. "Regional Interest Rates in Antebellum America," NBER Chapters, in: Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel, pages 159-187 National Bureau of Economic Research, Inc.
  14. Atack, Jeremy & Bateman, Fred & Weiss, Thomas, 1980. "The Regional Diffusion and Adoption of the Steam Engine in American Manufacturing," The Journal of Economic History, Cambridge University Press, vol. 40(02), pages 281-308, June.
  15. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, December.
  16. Dorothy S. Brady, 1966. "Price Deflators for Final Product Estimates," NBER Chapters, in: Output, Employment, and Productivity in the United States after 1800, pages 91-115 National Bureau of Economic Research, Inc.
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