Factor Endowments and the Returns to Skill: New Evidence from the American Past

49 Pages Posted: 14 Nov 2007 Last revised: 20 Aug 2010

See all articles by Joseph P. Kaboski

Joseph P. Kaboski

Ohio State University (OSU) - Economics; National Bureau of Economic Research (NBER); University of Notre Dame - Department of Economics

Trevon Logan

Ohio State University; National Bureau of Economic Research (NBER)

Date Written: November 2007

Abstract

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.

Suggested Citation

Kaboski, Joseph P. and Logan, Trevon, Factor Endowments and the Returns to Skill: New Evidence from the American Past (November 2007). NBER Working Paper No. w13589. Available at SSRN: https://ssrn.com/abstract=1029930

Joseph P. Kaboski

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Trevon Logan (Contact Author)

Ohio State University ( email )

2100 Neil Avenue
Columbus, OH OH 43210
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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