Our research aims to fill this gap by analyzing the economic effects of the Chinese Exclusion Act on non-Chinese workers and aggregate economic production in the Western United States. The effects are theoretically ambiguous. On the one hand, reducing the number of Chinese workers may have reduced competition for jobs and resources, which could have increased wages and employment for other workers. On the other hand, the loss of Chinese labor may have reduced the demand for other workers or lowered their wages. This could have happened if employers benefited from economies of scale or if Chinese workers complemented other workers in production such that their departure reduced average productivity. Over time, both the positive and negative effects of reduced foreign labor can be moderated by the inflow of new labor and the adoption of new technologies.
Our analysis examines a dataset that details labor force participation, income, and manufacturing activity between 1850 and 1940 for counties in eight Western states (Arizona, California, Idaho, Montana, Nevada, Oregon, Washington, and Wyoming), where almost all Chinese immigrants resided. Our research exploits the fact that the act likely had little direct effect on counties with a smaller share of Chinese residents but had larger effects on those with a higher share of Chinese residents when it was enacted. However, the location of Chinese workers as of the 1880 census was not random. The first waves of Chinese immigrants worked in mining and railway construction, and subsequent immigrants often moved to locations where earlier immigrants concentrated. Thus, our research design accounts for the number of years that each county had been connected to a railroad as of 1882 and whether each county ever had a mine between 1840 and 1882.
Our research examines the labor supply of men, who constituted 96 percent of the Chinese immigrants living in the United States in 1880. Our findings indicate that the act reduced the Chinese labor supply by 64 percent. A reduction occurred for both skilled and unskilled workers. Moreover, the act reduced the white male labor supply by 28 percent and lowered this group’s lifetime earnings. Since the Western United States grew rapidly during the late 19th and early 20th centuries, our negative findings indicate a slowdown in growth rather than a shrinking economy.
Furthermore, our research investigates the impact of the Chinese Exclusion Act on manufacturing. When the act was passed, the Western United States was in the early stages of industrialization; establishments were small and mostly relied on labor-intensive production. Our findings show that the act reduced total manufacturing output by 62 percent and the number of manufacturing establishments by 54–69 percent. Our research also reveals a negative effect on labor productivity, though it is imprecisely estimated.
There are two main concerns with the interpretation of these findings. The first is that factors other than the Chinese Exclusion Act contributed to our findings. Our research addresses this by repeating our analysis on counties in the Eastern United States in the hypothetical scenario that Chinese immigrants arrived from the Atlantic Ocean and chose residential locations with the same characteristics as the Western locations chosen by actual Chinese immigrants. If we found that counties with a higher hypothetical share of Chinese residents were worse off after the act, it would imply that our findings for the Western United States were not attributable to the act. However, our research finds the opposite: Counties with a high hypothetical share of Chinese immigrants after 1880 grew more than those with low hypothetical shares.
The second concern is that the Chinese Exclusion Act caused labor and economic activities to move from Western counties with a high share of Chinese immigrants in 1880 to those with a low share. This would imply a reallocation of economic activities rather than an economic slowdown. However, our findings rule out this possibility.
Finally, our research provides explanations for these findings. One explanation is that it was difficult for employers to replace Chinese workers because American workers outside the West could not easily obtain information about economic opportunities in the West, and the cost of traveling westward was high. Indeed, the slowdown in economic activity was greatest in Western counties that were more remote and less connected to the rest of the country. Moreover, the negative effects on the labor supply mostly affected white men born outside the West in the United States and those born in Europe; the act did not affect white men born in the West. In fact, the only group of white men for whom our research found positive effects on labor supply were white miners born in the state in which they worked. These findings suggest that the act discouraged prospective white migrants from moving to the West, causing them to remain in the Eastern United States. Thus, the Chinese Exclusion Act may have reduced the economic development of the West. Additionally, counties that lost a higher share of skilled Chinese workers also experienced a larger decline in skilled white workers and manufacturing output. This suggests that skilled Chinese workers and skilled white workers may have boosted each other’s productivity.
An alternative explanation is that the departure of Chinese immigrants reduced consumption, which lowered demand for local products and labor. However, this is unlikely to be the main driver of our findings for two reasons. First, historical accounts indicate that Chinese workers consumed much less than other workers because they sent a large share of their earnings as remittances back to China. Second, our findings show that the act had large negative effects on the labor supply in sectors that produced regionally, nationally, and even internationally traded goods, such as manufacturing and mining. In contrast, our findings reveal a smaller effect on the white labor supply in agriculture, which produces goods more likely to be consumed locally.
