TY  - JOUR
AU  - James,John A.
AU  - Skinner,Jonathan S.
TI  - The Resolution of the Labor Scarcity Paradox
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1504
PY  - 1984
Y2  - November 1984
UR  - http://www.nber.org/papers/w1504
L1  - http://www.nber.org/papers/w1504.pdf
N1  - Author contact info:
John James
Dept. of Economics
University of Virginia
PO Box 400182
Charlottesville, VA 22904
E-Mail: jaj8y@virginia.edu

Jonathan S. Skinner
Department of Economics
6106 Rockefeller Hall
Dartmouth College
Hanover, NH 03755
Tel: 603/646-2535
Fax: 603/646-2122
E-Mail: jonathan.skinner@dartmouth.edu
AB  - This paper reconciles the apparently contradictory evidence about American and British technology in the first half of the nineteenth century. Past studies have focused on the writings of a number of distinguished British engineers, who toured the United States during the 1850s and commented extensively on the highly mechanized state of the manufacturing sector. Other studies, however, have marshalled evidence that the interest rate was higher, and the aggregate manufacturing capital stock was lower, in the United States relative to Britain. We resolve this paradox by noting that British engineers were most impressed by only a few industries which relied on skilled workers. Using the 1849 Census of Manufactures, we estimate separate production functions for the skilled sector and for the remaining, less skilled manufacturing sector. We find strong relative complementarity between capital and natural resources in the skilled sector, and relative substitutability between skilled labor and capital. Using these parameters in a computable general equilibrium model of the U.S. and British economies indicates greater capital intensity (or labor scarcity) in the skilled manufacturing sector, but overall capital scarcity and higher interest rates, in the U.S. relative to Britain.
ER  -