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Long-Run Substitutability Between More and Less Educated Workers: Evidence from U.S. States, 1950-1990

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  • Antonio Ciccone

    (ICREA and Universitat Pompeu Fabra)

  • Giovanni Peri

    (UC Davis, UCLA, and NBER)

Abstract

We estimate the aggregate long-run elasticity of substitution between more educated workers and less educated workers (the slope of the inverse demand curve for more relative to less educated workers) at the U.S. state level. Our data come from the (five) 1950-1990 decennial censuses. Our empirical approach allows for state and time fixed effects and relies on time- and state-dependent child labor and compulsory school attendance laws as instruments for (endogenous) changes in the relative supply of more educated workers. We find the aggregate long-run elasticity of substitution between more and less educated workers to be around 1.5. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Antonio Ciccone & Giovanni Peri, 2005. "Long-Run Substitutability Between More and Less Educated Workers: Evidence from U.S. States, 1950-1990," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 652-663, November.
    • Handle: RePEc:tpr:restat:v:87:y:2005:i:4:p:652-663
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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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