Development of the American economy.

• Author: Goldin, Claudia
• Position: National Bureau of Economic Research's Program on the Development of the American Economy - Program Report

The NBER's Program on the Development of the American Economy (DAE) includes research on labor and population, industrial organization, financial and macroeconomic history, and political economy. Yet all of its members are engaged in the "objective quantitative analysis of the American economy," the stated mission of the NBER. The NBER was established 75 years ago to inform contemporary policy debate. Wesley C. Mitchell, the first president of the NBER, was an economic historian who appreciated the need to produce data and the difficulty in doing so. He also recognized that history was essential to the policy debates of his age, and for the same reason it is essential to those of ours: it is risky and foolish to base conclusions on potentially transient phenomena. The central task of the DAE program today is precisely that which led to the formation of the NBER: informing current policy debate through the use of historical data and analysis.

This summary highlights some of the work of a subgroup of DAE researchers who have been concerned mainly, although not exclusively, with labor and population issues. How economies and regions became integrated economically (and sometimes became disintegrated) is central to several projects that emphasize the role of factor flows, particularly flows of labor, but also of capital and commodities. Some of the work deals with distributional issues, such as the roles of education and technology in affecting the wage structure. Other papers focus on how human capital investments in education and health enhance labor productivity, change labor supply, and alter longevity and the quality of life. Still others seek the causes and labor market impact of institutional change, for example government provision of social insurance and the extension of publicly provided education.

Convergence and Market Integration

Jeffrey G. Williamson, jointly with Alan Taylor and other coauthors, is engaged in research on the impact of commodity and factor flows on convergence since 1850. Their work points to two golden ages of convergence among the current OECD countries - from 1850 to 1914, and from 1950 to 1995 - as well as one period when it stopped, between 1914 and 1950. To deal explicitly with multifactor theories of convergence, Williamson has assembled annual time series of purchasing-power-parity (PPP) adjusted real wages for 17 Old World (European) and New World countries.(1) Most Old World countries had far lower real wages than the New World countries did. For example, in the 1880s Sweden's real wages were 0.39, and Norway's were 0.44, of those in the New World. But just 25 years later, there was considerable catch-up, with Sweden's wage increasing to 0.56, and Norway's to 0.67, of the New World's.

Various papers in this project demonstrate that open-economy forces, often ignored in the new growth literature, explain a large share of the convergence of PPP-adjusted real wages between 1850 and World War I. According to these studies, mass migrations within Europe, and between Europe and the New World, account for a large part of the convergence. And these migrations, which were the greatest in world history, in turn were slowed by the convergence in standards of living.(2)

Commodity trade, as once suggested by Heckscher and Ohlin, was another major factor. World...