Working Paper

Revisiting Adam Smith and the Division of Labor: New Evidence from U.S. Occupational Data, 1860–1940

Abstract: Using novel occupational data from the United States between 1860 and 1940, we evaluate Adam Smith’s core propositions regarding the division of labor, market size, innovation, and productivity. We document significant growth in occupational diversity during this period using new measures of labor specialization that we construct from workers’ self-reported job titles in the decennial census. Consistent with Smith’s hypotheses, we find strong empirical evidence that labor specialization increases with the extent of the market, is facilitated by technological innovation, and is ultimately associated with higher manufacturing productivity. Our findings also extend Smith’s narrative by highlighting the role of organizational changes and innovation spillovers during the Second Industrial Revolution. These results speak to the enduring relevance of Smith’s insights in the context of an industrializing economy characterized by large firms, complex organizational structures, and rapid technological change.

JEL Classification: N11; O14; J24; D24;

https://doi.org/10.18651/RWP2025-08

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Research Working Paper

Publication Date: 2025-09-03

Number: RWP 25-08