Development of the American economy.

• Author: Goldin, Claudia

Development of the American Economy

The NBER's Program on the Development of the American Economy (DAE), established ten years ago, has continued the work of the Bureau in exploring the pace and pattern of economic growth in America. The DAE program's subjects--including income inequality, industrial productivity, the gender gap in earnings, long-run demographic change, savings and the capital stock--range widely in scope and time period but are united by a common methodology.

We focus on issues of current economic policy significance that require knowledge of long-term economic factors. For example, DAE researchers have demonstrated that we cannot understand current differences between male and female workers without knowledge of the past; similarly, we cannot comprehend the reasons for black and white income differentials today without historical study. In the past, such research efforts often had been stymied by the absence of suitable data. The DAE program already has assembled more than 50 historical datasets capable of revealing the relationship between the current and past behaviors of households and firms.

The DAE program covers seven major areas: labor and population; capital and savings; technology and productivity change; an industrial organization approach to governments and firms; industrial organization and business history; macroeconomic history; and political economy.(1) The results of DAE projects are now being disseminated in the NBER-DAE Historical Factors in Long-Run Growth Working Papers Series, and the NBER Working Paper Series. The DAE has also just initiated a series of monographs, Long-Term Factors in Economic Development, under the editorial direction of Clayne L. Pope and Robert W. Fogel. Thus far, 10 monographs written by 14 NBER-DAE research associates are scheduled for this series. Two have gone to press, one is being edited, and seven others are in varying stages of production.(2)

Because of the breadth of the DAE program, I have selected three projects to highlight here: gender differences in earnings and occupations; racial disparities in schooling and economic success; and the inequality of income and wealth on the American frontier. Each has been the primary research project of a DAE member for the past five years, and each is scheduled for inclusion in the monograph series.

Understanding the Gender Gap: An Economic History of American Women

In my recent book, I examine the evolution of the female work force, from the late eighteenth century to the present, and the historical roots of present gender inequalities. Like other DAE projects, this study draws on a variety of data sources, including Census manuscripts, city and business directories, original schedules of (U.S. Department of Labor) Women's Bureau bulletins, and U.S. Commissioner of Labor reports.

The labor force participation rate of married women in 1900 was about one-tenth what it is today; fewer than two workers out of ten were female in 1900, while almost half are female today. Yet in terms of earnings and occupations, women have fared less well. Occupations have been segregated by sex throughout our history, and this segregation diminished only slightly from 1900 to 1970. In both years, about two-thirds of all women or men would have had to change occupations to bring about parity by sex. The ratio of female-to-male earnings remained stable from the 1950s to the early 1980s, hovering around 60 cents on the dollar, although the ratio has increased substantially since 1981. Further, economic analysis indicates that less than half of the difference between the earnings of men and women can be explained by their observable characteristics, other than gender, such as years of work experience and education.

The disparity between changes in the employment of women and the gender gap in earnings is disturbing to many. But rising participation need not lead to increased labor market experience, and generally it is years on the job that augments earnings for the individual. The connection between changes in participation and in work experience depends on whether women work intermittently or whether they are continuous participants over their life cycles. I find that adult working women remained employed for extensive periods. For example, in 1940 more than 60 percent of a group of 45-year-old married working women had been employed for 75 percent of the years since they began work. The great majority of employed women were continuous participants and as employment rates rose they were joined in the labor force by women whose previous work...