Long-Run Substitutability between More and Less Educated Workers: Evidence from U.S. States 1950-1990
UPF Economics and Business Working Paper No. 764
35 Pages Posted: 12 Jul 2004
Date Written: June 2004
We estimate the aggregate long-run elasticity of substitution between more and less educated workers (the slope of the demand curve for more relative to less educated workers) at the US 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.
Keywords: Elasticity of substitution, education, U.S. states, skill biased technological change
JEL Classification: J3, R1, O3
Suggested Citation: Suggested Citation