The Persistent Effect of Temporary Input Cost Advantages in Shipbuilding, 1850 to 1911

Abstract

Can temporary input cost advantages have a long-run impact on production patterns? I study this question in the context of shipbuilding from 1850 to 1911. Although North America was the dominant wood shipbuilding region in the mid-19th century, the introduction of metal shipbuilding shifted the industry to Britain, where metal inputs were less expensive. After 1890, Britain's input price advantages largely disappeared but its dominant position in the industry persisted. I show that American shipbuilders exposed to British competition struggled to transition to metal shipbuilding and present evidence that the mechanism behind Britain's persistent lead was the development of pools of skilled workers.