Factor Endowments and the Returns to Skill: New Evidence from the American Past
National Bureau of Economic Research, 2007 - Education - 35 pages
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.
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agriculture biased technical change capital endowments capital intensity capital-dependent sector capital-intensive technology CD CD Census Claudia CM CD demand for skill early twentieth century Economic History education for teachers educational endowment estimate the returns evidence experience factor endowments gender Georgia Goldin and Katz high-skilled workers higher History 50 horsepower Illinois income per worker increasing returns industrialization IPUMS Journal of Economic labor force labor productivity labor scarcity Lawrence F low returns low-skilled workers median median-level Midwestern Mincerian Regressions Mincerian returns Mitchener and McLean NBER Working Paper Northeast and Midwest old capital-intensive overall returns percent predictions Price Adjusted Income regional heterogeneity relative wage resource endowments returns to education returns to schooling returns to skill Robust Robust regression salaries sample Savoca SBTC secondary teachers skill biased technical skill-biased technical change South Table technological change technological endowment Texas Thorndike Report twentieth century U-shaped returns Wisconsin women