Interindustry Factor Mobility, and Technological Change: Evidence on Wage and Profit Dispersion Across U.S

Interindustry factor mobility is a crucial determinant of the income-distribution effects of exogenous changes in relative commodity prices. This examination of inter-industry variation in wages and profits using data from manufacturing industries from 1820 to 1990 suggests that interindustry factor mobility may be strongly related to the processes of industrialization. Development in the nineteenth century produced a sharp rise in mobility (a decline in interindustry wage and profit differentials) due to rapid improvements in transportation and the introduction of factory production. Twentieth-century industrialization, involving greater reliance on specialized equip-ment and knowledge, reduced levels of interindustry mobility. For several decades now economists have been keenly aware that theincome-distribution effects of various exogenous changes that alter rela-tive commodity prices are crucially affected by the level of interindustry factor mobility.1 The ability of owners of labor and capital to move be-tween employment in different industries (or, conversely, the extent to which their assets are “specific ” to particular industries) has been a particu-lar concern for trade economists interested in the income effects of trad