October 05, 2003

Capital Deepening in Mid-Nineteenth Century America

Atack, Bateman, and Margo fill in a hole in our understanding of how America became the most capital-intensive economy in the world:

Capital Deepening in American Manufacturing, 1850-1880: 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...

Posted by DeLong at October 5, 2003 05:47 PM | TrackBack

Comments

Hmm... for some reason I always thought that the U.S. had a fairly low capital-output ratio, which is why people want to invest here.

I mean, the U.S. WAS an importer of capital from 1850s-1880s, right? Why would capital flow TO a place with a high capital-output ratio? Maybe I'm missing something.

Thanks for any help.

Posted by: Julian Elson on October 5, 2003 06:32 PM
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