Guy Michaels

The Effect of Trade on the Demand for Skill - Evidence from the Interstate Highway System

Since changes in trade openness are typically confounded with other factors, it has been difficult to identify the labor market consequences of increased international trade. The advent of the United States Interstate Highway System provides a unique policy experiment, which I use to identify the effect of reducing trade barriers on the relative demand for skilled labor. The Interstate Highway System was designed to connect major metropolitan areas, to serve national defense and to connect the United States to Canada and Mexico. As a consequence–though not an objective–many rural counties were also connected to the highway system. I find that these counties experienced an increase in trade-related activities, such as trucking and retail sales, by 7-10 percentage points per capita. Most significantly, by increasing trade the highways raised the relative demand for skilled manufacturing workers in counties with a high endowment of human capital and reduced it elsewhere, consistent with the predictions of the Heckscher-Ohlin model.

The Long Term Consequences of Resource-Based Specialisation

Using geological variation in oil abundance in the Southern US, I examine the long term effects of resource-based specialisation through economic channels. In 1890 oil abundant counties were similar to other nearby counties but after oil was discovered they began to specialise in its production. From 1940–90 oil abundance increased local employment per square kilometre especially in mining but also in manufacturing. Oil abundant counties had higher population growth, higher per capita income and better infrastructure.

Has ICT Polarized Skill Demand? Evidence from Eleven Countries over Twenty-Five Years

We test the hypothesis that information and communication technologies (ICT) polarize labor markets by increasing demand for the highly educated at the expense of the middle educated, with little effect on low-educated workers. Using data on the United States, Japan, and nine European countries from 1980 to 2004, we find that industries with faster ICT growth shifted demand from middle-educated workers to highly educated workers, consistent with ICT-based polarization. Trade openness is also associated with polarization, but this is not robust to controlling for R&D. Technologies account for up to a quarter of the growth in demand for highly educated workers.

Robots at Work

We analyze for the first time the economic contributions of modern industrial robots, which are flexible, versatile, and autonomous machines. We use novel panel data on robot adoption within industries in seventeen countries from 1993 to 2007 and new instrumental variables that rely on robots’ comparative advantage in specific tasks. Our findings suggest that increased robot use contributed approximately 0.36 percentage points to annual labor productivity growth, while at the same time raising total factor productivity and lowering output prices. Our estimates also suggest that robots did not significantly reduce total employment, although they did reduce low-skilled workers’ employment share.

Resetting the Urban Network: 117-2012

Do locational fundamentals such as coastlines and rivers determine town locations, or can historical events trap towns in unfavorable locations for centuries? We examine the effects on town locations of the collapse of the Western Roman Empire, which temporarily ended urbanization in Britain, but not in France. As urbanization recovered, medieval towns were more often found in Roman-era town locations in France than in Britain, and this difference persists today. The resetting of Britains urban network gave it better access to natural navigable waterways when this was important, while many French towns remained without such access. We show that towns without coastal access grew more slowly in both Britain and France from 1200-1800, and calculate that with better coastal access, Frances urban network would have been up to 20-30 percent larger in 1800.

Technology, Complexity and Information: The Evolution of Demand for Office Workers

This paper examines the effects of technology on information processing over more than a century, using industry-level variation in the demand for clerical office workers. Clerks are skilled workers who generate, store, and communicate information that is used by manufacturing firms to coordinate production. I find that production technology affects the demand for clerks. In particular, industries with a more complex division of labor employ relatively more clerks. I document this result using an early information technology (IT) revolution that took place around 1900, when telephones, typewriters, and improved filing techniques were introduced to the office. This IT revolution raised the demand for clerks in all manufacturing industries, but significantly more so in industries with a more complex division of labor. The increased demand for clerks raised the aggregate demand for skill, likely contributing to the onset of the High School Movement and to womens increased labor force participation. Interestingly, recent changes in IT have enabled firms to substitute computers for clerks, providing a concrete case in which technology and a specific set of skills are substitutes rather than complements.