Working Paper: NBER ID: w12694
Authors: Markus Mobius; Raphael Schoenle
Abstract: The division of labor first increased during industrialization and then decreased again after 1970 as job roles have expanded. We explain these trends in the organization of work through a simple model where (a) machines require standardization to exploit economies of scale and (b) more customized products are subject to trends and fashions which make production tasks less predictable and a strict division of labor impractical. At the onset of industrialization, the market supports only a small number of generic varieties which can be mass-produced under a strict division of labor. Thanks to productivity growth, niche markets gradually expand, producers eventually move into customized production and the division of labor decreases again. The model predicts capital-skill substitutability during industrialization and capital skill complementarity in the maturing industrial economy. Moreover, conventional calculations of the factor content of trade underestimate the impact of globalization because they do not take into account changes in product market competition induced by trade. We test our model by exploiting the time-lags in the introduction of bar-coding in three-digit SIC manufacturing industries in the US. We find that both increases in investments in computers and bar-coding have led to skill-upgrading. However, consistent with our model bar-coding has affected mainly the center of the skill distribution by shifting demand away from the high-school educated to the less-than-college educated.
Keywords: division of labor; industrialization; barcoding; skill upgrading; labor organization
JEL Codes: J24; L23; O31; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological changes in production processes (O33) | Changes in the organization of work (L23) |
| Market conditions (D49) | Organizational structure of firms (L22) |
| Globalization and product market competition (F61) | Changes in the organization of work (L23) |
| Barcoding and computer use (C89) | Skill upgrading (J24) |
| Technological advancements (O33) | Shifts in labor demand across different skill levels (J24) |
| Introduction of barcoding (Y20) | Shifted demand away from high-school educated workers (J29) |
| Increased investment in barcoding (G31) | Impact on the center of the skill distribution (D39) |