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Changing Returns to Scale in Manufacturing 1880-1930: The Rise of (Skilled) Labor?

Author

Listed:
  • Jeanne Lafortune
  • Ethan G. Lewis
  • José Pablo Martínez
  • José Tessada

Abstract

This paper estimates returns to scale for manufacturing industries around the turn of the twentieth century in the United States by exploiting an industry-city panel data for the years 1880-1930. We estimate decreasing returns to scale on average over the period, contrary to most of the existing literature, because our empirical methodology allows us to separate returns to scale from "agglomeration" effects. We also find that returns to scale grew substantially after 1910, mostly because the return to labor grew. We find that this was more marked in industries that were more intensive in human capital and energy at the beginning of the period and in cells that were less competitive. Overall, results suggest that technological change and lack of initial competition played relevant roles in the rise of larger establishments in manufacturing.

Suggested Citation

  • Jeanne Lafortune & Ethan G. Lewis & José Pablo Martínez & José Tessada, 2021. "Changing Returns to Scale in Manufacturing 1880-1930: The Rise of (Skilled) Labor?," NBER Working Papers 28633, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28633
    Note: DAE LS
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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • N61 - Economic History - - Manufacturing and Construction - - - U.S.; Canada: Pre-1913
    • N62 - Economic History - - Manufacturing and Construction - - - U.S.; Canada: 1913-
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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