Schooling Supply and the Structure of Production: Evidence from US States 1950-1990
This paper finds that over the period 1950-1990, states in the United States absorbed increases in the supply of schooling due to tighter compulsory schooling and child labor laws mostly through within-industry increases in the schooling intensity of production. Shifts in the industry composition toward more schooling-intensive industries played a less important role. To try and understand this finding theoretically, the authors consider a free trade model with two goods/industries, two skill types, and many regions that produce a fixed range of differentiated varieties of the same goods. They find that a calibrated version of the model can account for shifts in schooling supply being mostly absorbed through within-industry increases in the schooling intensity of production even if the elasticity of substitution between varieties is substantially higher than estimates in the literature.
- Theoretical Framework
- Data and Empirical Framework