Capital Deepening in American Manufacturing, 1850-1880 / Jeremy Atack, Fred Bateman, Robert A. Margo.

Format:

Book

Author/Creator:

Atack, Jeremy.

Contributor:

National Bureau of Economic Research.

Bateman, Fred.

Margo, Robert A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9923.

NBER working paper series no. w9923

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

We use establishment-level data to study capital deepening -- increases in the capital-output ratio -- in American manufacturing from 1850 to 1880. In nominal terms, the aggregate capital-output ratio in our samples rose by 30 percent from 1850 to 1880. Growth in real terms was considerably greater -- 70 percent -- because prices of capital goods declined relative to output prices. Cross-sectional regressions suggest that capital deepening was especially importnat in the larger firms and was positively associated with the diffusion of steam-powered machinery. However, even after accounting for shifts over time in such factors, much of the capital deepening remains to be explained. Although capital deepening implies a fall in the average product of capital it does not necessarily imply that rates of return were declining. However, we find strong evidence that returns did decline. We also show that returns were decreasing in firm size, although the data are not sufficiently informative to tell us why it was so.

Notes:

Print version record

August 2003.