Working Paper: NBER ID: w13589
Authors: Joseph Kaboski; Trevon D. Logan
Abstract: The existing literature on skill-biased technical change has not considered how the technological endowment itself plays a role in the returns to skill. This paper constructs a simple model of skill biased technical change which highlights the role that resource endowments play in the returns to education. The model predicts variation in returns to education with skill biased technological change if there is significant heterogeneity in resource endowments before the technological change. Using a variety of historical sources, we document the heterogeneous technology levels by region in the American past. We then estimate the returns to education of high school teachers in the early twentieth century using a new data source. a report from the U.S. Commissioner of Education in 1909. Overall, we find significant regional variation in the returns to education that match differences in resource endowments, with large (within-occupation) returns for the Midwest and Southwest (7%), but much lower returns in the South (3%) and West (0.5%). We also show that our results are generalizable to returns to education in the United States and that returns to education for teachers tracked quite closely with the overall returns to education from 1940 onward.
Keywords: skill-biased technical change; returns to education; regional economic variation; historical evidence
JEL Codes: I21; J22; J23; N3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher capital intensity in a region (R11) | Greater returns to education (I26) |
| Greater returns to education (I26) | Indicative of broader labor market trends (J20) |
| Higher capital intensity in a region (R11) | Higher returns to education in the United States (I26) |
| Regional factor endowments (R11) | Returns to education for high school teachers (I26) |