DP17389 The impact of mechanisation on wages and employment: evidence from the diffusion of steam power

Author(s): Leonardo Ridolfi, Carla Salvo, Jacob Weisdorf
Publication Date: June 2022
Keyword(s): employment, Health, Human Capital, Industrialisation, Innovation, Labour, Motive Power, Wages
JEL(s): I15, J31, J42, L92, O14, O33
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17389

Is mechanisation labour displacing? We use two all-inclusive industrial censuses from 19th-century France to examine the effect on wages and employment of one of the greatest waves of mechanisation in history: the diffusion of steam power. Many and costly workers were positively associated with the later adoption of steam. This suggests that mechanisation intended to save on the labour bill. But after controlling for selection effects, our diff-in-diff analysis shows that steam-adopting industries ended up employing both more and better-paid workers on average than their non-steam-adopting counterparts. This disputes the widespread view that past mechanisations entailed technical unemployment and falling labour compensation.