Electricity and the Technology–Skill Complementarity: Evidence from the Swedish Industrial Census of 1931

Abstract

Notwithstanding the popularity among economists of attributing the surging inequality of recent decades to technology–skill complementarity, researchers with a keen eye on history have been reluctant to pick up this thread. This paper joins Claudia Goldin and Lawrence Katz’s attempt to examine the role of electrification as an example of a technology that is complementary to workers’ rising skill levels. Sweden electrified manufacturing processes rapidly in the first quarter of the twentieth century, while the supply of skills through secondary education only increased significantly in the 1950s. We use industry-specific information from the Swedish Industrial Census of 1931 to establish whether electricity and the use of white-collar workers correlated positively. The results indicate that the correlation was positive, but the estimated effect was rather small. Moreover, the available evidence for skill ratios does not suggest that inequality, thus measured, increased. We conclude that labor market institutions prevented—and also overturned—the inequality push emanating from technology.