Factor Endowments and the Returns to Skill: New Evidence from the American Past
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.
This paper previously circulated under the title "The Returns to Education in the Early Twentieth Century: New Historical Evidence." We thank Audrey Light, Peter Meyer, Rick Steckel, Robert Whaples, and participants at the NBER Summer Institute, 2006 Economic History Association Annual Meetings, and the 2006 Social Science History Association Annual Meetings for comments on a previous version of this paper. We thank Joshua Cepluch, Sharmistha Dey, and Britney Williams for excellent research assistance. We gratefully acknowledge the financial support of the OSU Economics fund for Junior Faculty Research. The usual disclaimer applies. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Joseph P. Kaboski & Trevon D. Logan, 2011. "Factor Endowments and the Returns to Skill: New Evidence from the American Past," Journal of Human Capital, University of Chicago Press, vol. 5(2), pages 111 - 152. citation courtesy of