Labor and Invention as Complements: Evidence from 1920s Immigration Quotas

Economists have long posited that scarce labor should encourage invention (Hicks 1932). We provide the first causal evidence of mass low skilled immigration’s effect on invention, using variation induced by 1920s quotas to the United States, which ended history’s largest international migration. Both counties and individual inventors exposed to fewer low-skilled immigrants applied for fewer patents. Firms with large establishment sizes disproportionately decreased their invention, suggesting invention depends on the scale of labor in production. In early twentieth century America, the increasing scarcity of labor discouraged invention, in part because labor scale and invention were complements.