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Biased Technical Change, Scale, and Factor Substitution in American Industry, 1850–1919

Published online by Cambridge University Press:  03 March 2009

Louis P. Cain  and
Donald G. Paterson
Louis P. Cain
Affiliation:
Professors of Economics at Loyola University of Chicago, Illinois 60611
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Abstract

Biased technical change, scale economies, and factor substitution were part of U.S. manufacturing's technical response to factor price movements during the period 1850 to 1919. In this article we employ the cost dual of a Generalized Leontief production function to test directly for the presence of these three effects for nineteen two-digit manufacturing sectors. Biased technical change is found in all but one sector; scale economies in all but two; factor substitutability, in all but five. Estimates of scale and bias effects for labor, capital, and materials are presented by sector, and the results are compared with other recent work.

Type
Articles
Information
The Journal of Economic History , Volume 46 , Issue 1 , March 1986 , pp. 153 - 164
Copyright
Copyright © The Economic History Association 1986

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References

1 Cain, Louis P. and Paterson, Donald G., “Factor Biases and Technical Change in Manufacturing: The American System, 1850–1919,” this Journal, 41 (06 1981), pp. 341–60.Google Scholar

2 Habakkuk, H. J., American and British Technology in the Nineteenth Century (Cambridge, 1962);Google Scholar and Rothbarth, Erwin, “Causes of the Superior Efficiency of the U.S.A. Industry as Compared With British Industry,” Economic Journal, 56 (09. 1946), pp. 383–90. Habakkuk concentrated his attention on the first half of the nineteenth century but argued the history was relevant to the latter half as well, pp. 197, 215.CrossRefGoogle Scholar

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8 Use of this cost function is relatively less expensive in its data requirements than the translog functional form we used in our earlier study which is attributable to the absence of cross equation constraints.Google Scholar

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17 The following notes the SIC groups and the range of the average L/Y: SIC 22–23, .61 to .70; SIC 24–25, .96 to.99; SIC 28–30, .22 to .31; and SIC 34–39, .42 to .49.Google Scholar

18 These five are the labor coefficient for transportation equipment (SIC 37) and miscellaneous goods (SIC 39), the capital coefficient for textiles (SIC 22) and petroleum (SIC 29), and the materials coefficient for stone, clay, and glass products (SIC 32).Google Scholar

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26 In only one sector, paper and its products, is the null hypothesis of no biased technical change accepted at the .95 level of confidence. Even at the .99 level, the null hypothesis would gain acceptance in only three cases.Google Scholar

27 Uselding, “Factor Substitution,” pp. 670–81.Google Scholar

28 Parks, “Price Responsiveness,” pp. 129–39; and Woodland, “Substitution,” pp. 171–87.Google Scholar