Working Paper: NBER ID: w5657
Authors: Claudia Goldin; Lawrence F. Katz
Abstract: Current concern with relationships among particular technologies, capital, and the wage structure motivates this study of the origins of technology-skill complementarity in manufacturing. We offer evidence of the existence of technology-skill and capital-skill (relative) complementarities from 1909 to 1929, and suggest that they were associated with continuous-process and batch methods and the adoption of electric motors. Industries that used more capital per worker and a greater proportion of their horsepower in the form of purchased electricity employed relatively more educated blue-collar workers in 1940 and paid their blue-collar workers substantially more from 1909 to 1929. We also infer capital-skill complementarity using the wage-bill for non-production workers and find that the relationship was as large from 1909-19 as it has been recently. Finally, we link our findings to those on the high-school movement (1910 to 1940). The rapid increase in the supply of skills from 1910 to 1940 may have prevented rising inequality with technological change.
Keywords: Technology; Skill Complementarity; Wage Structure; Manufacturing
JEL Codes: N32; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technology adoption (O33) | Demand for educated blue-collar workers (J24) |
| Higher capital investment (G31) | Demand for educated blue-collar workers (J24) |
| Increased use of electricity (L94) | Demand for educated blue-collar workers (J24) |
| Technology adoption (O33) | Higher wages for educated blue-collar workers (J39) |
| Higher capital investment (G31) | Higher wages for educated blue-collar workers (J39) |
| Increased use of electricity (L94) | Higher wages for educated blue-collar workers (J39) |
| Increase in supply of educated workers (J24) | Mitigated impact of technological change on rising inequality (O49) |