Over the past thirty years, U.S. manufacturing plants invested heavily in automation machinery. This paper shows these investments substituted for the least-skilled workers and complemented middle-skilled workers at equipment and fabricated metal plants. Specifically, it exploits the fact that some metropolitan areas experienced faster growth in the relative supply of less-skilled labor in the 1980s and 1990s due to an immigration wave and the tendency of immigrants to regionally cluster. Plants in these areas adopted significantly less machinery per unit output, despite having similar adoption plans initially. The results imply that fixed rental rates for automation machinery reduce the impact that immigration has on less-skilled relative wages.
The introduction and diffusion of personal computers are widely viewed as a technological revolution. Using U.S. metropolitan area–level panel data, this paper asks whether links between PC adoption, educational attainment, and the return to skill conform to a model of technological revolutions in which the speed and extent of adoption are endogenous. The model implies that cities will adjust differently to the arrival of a more skill-intensive means of production, with the returns to skill increasing most where skill is abundant and its return is low. We show that the cross-city data fit many of the predictions of the model during the period 1980–2000, the PC diffusion era.
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