Cheap Industrial Workers and the Big Push: Evidence from Germany's post-war population transfer

If firms can adapt their production technology, changes in labor supply will induce biased technological adoption. If this technological response is strong enough, the long-run demand function will be upward sloping. In this paper I test this hypothesis using data from one of the largest population transfer programs of the 20th century. After WW2, Germany lost part of its Eastern Territories as means of reparation payments. Within 2 years, more than 8m people were expelled and transferred to Western Germany. Using individual-level data of the 1960s and 70s I show that refugees experienced substantial reallocation into unskilled occupations, that refugee-rich counties have higher employment shares in occupations which require little formal human capital and which use unskill-biased technologies and that wages in those occupations are especially high in refugee-rich counties. This is consistent with theories of biased technological adoption but hard to rationalize in a neoclassical framework.