Development of the American Economy

Development of the American Economy

Members of the NBER's Development of the American Economy Program met in Cambridge on March 24. Program Co-Directors Leah Platt Boustan of Princeton University and William J. Collins of Vanderbilt University organized the meeting. These researchers' papers were presented and discussed:

Samuel Bazzi, Boston University; Martin Fiszbein, Boston University and NBER; and Mesay Melese Gebresilasse, Boston University

Frontier Culture: The Roots and Persistence of "Rugged Individualism" in the United States

In a classic 1893 essay, Frederick Jackson Turner argued that the American frontier promoted individualism. Bazzi, Fiszbein, and Melese Gebresilasse revisit the Frontier Thesis and examine its relevance at the subnational level. Using Census data and GIS techniques, they track the frontier throughout the 1790-1890 period and construct a novel, county-level measure of historical frontier experience. They document skewed sex ratios and other distinctive demographics of frontier locations, as well as their greater individualism (proxied by infrequent children names). Many decades after the closing of the frontier, counties with longer historical frontier experience exhibit more prevalent individualism and opposition to redistribution and regulation. The researchers take several steps towards a causal interpretation, including an instrumental variables approach that exploits variation in the speed of westward expansion induced by national immigration inflows. Using linked historical Census data, the researchers identify mechanisms giving rise to a persistent frontier culture. Selective migration contributed to greater individualism, and frontier conditions may have further shaped behavior and values. Bazzi, Fiszbein, and Melese Gebresilasse provide evidence suggesting that rugged individualism may be rooted in its adaptive advantage on the frontier and the opportunities for upward mobility through effort.

Karen Clay, Carnegie Mellon University and NBER; Ethan J. Schmick, Washington & Jefferson College; and Werner Troesken, University of Pittsburgh and NBER

The Rise and Fall of Pellagra in the American South

Clay, Schmick, and Troesken explore the rise and fall of pellagra (a disease caused by inadequate niacin consumption) in the American South. They first consider the hypothesis that the South's monoculture in cotton undermined nutrition by displacing local food production. Consistent with this hypothesis, a difference in differences estimation shows that after the arrival of the boll weevil, food production in affected counties rose while cotton production and pellagra rates fell. The researchers also present evidence that after 1937 pellagra was effectively controlled through improved medical understanding and the passage of fortification laws.

Vellore Arthi, University of Essex; Brian Beach, College of William and Mary and NBER; and Walker Hanlon, New York University and NBER

Estimating the Recession-Mortality Relationship when Migration Matters (NBER Working Paper No. 23507)

Existing work on the impact of business cycles on health yield conflicting results. Studies using aggregate data tend to find strong evidence of pro-cyclicality, while those examining individual-level data find either no effect or countercyclicality. Arthi, Beach, and Hanlon ask whether migration offers an explanation for this, as the aggregate-data approach places strong assumptions about the accuracy of intercensal population estimates. To examine this, they identify a recession that offers a plausibly exogenous shock to economic conditions as well as the potential to construct individual mortality data. The researchers' setting is the recession in the cotton textile-producing regions of Britain brought on by the American Civil War. Drawing on comprehensive and publicly available death records and census records they are able to identify where individuals lived at the onset of the recession, regardless of where they died. Results indicate that the mortality rate in these regions increased during the recession. Turning to aggregate data and employing the standard approach suggests that mortality fell during the recession, which is consistent with much of the existing literature. These conflicting results indicate that migration can meaningfully bias estimates of the recession-mortality relationship when using aggregate data.

Taylor Jaworski, University of Colorado at Boulder and NBER, and Carl Kitchens, Florida State University and NBER

The Interstate Highway System and the Development of the American Economy

The construction of the Interstate Highway System reduced travel times and the cost of moving freight in the United States over the second half of the twentieth century. From 1960 to 2010 travel times fell by one-third across all US counties. Jaworski and Kitchens use a theoretical framework that combines many domestic and foreign locations{respectively, US counties and foreign countries{and sectors together with newly digitized data on internal trade costs in the United States to understand the role improvements in high-way infrastructure played in the development of US regions. In particular, they focus on the aggregate contribution of each segment of the Interstate Highway System to labor income, the distributional impact across counties, and the relative importance of access to domestic and international markets. In this version of the paper, the researchers present results for the aggregate and spatial distributional effect of removing each segment of the Interstate Highway System in 2010. Jaworski and Kitchens also present results for the aggregate effect for the ten largest segments (in 2010 miles) for each decade from 1970 to 2010.

Gregori Galofré-Vilà, University of Oxford; Christopher M. Meissner, University of California at Davis and NBER; Martin McKee, London School of Hygiene; and David Stuckler, Università Bocconi

Austerity and the Rise of the Nazi Party (NBER Working Paper No. 24106)

The current historical consensus on the economic causes of the inexorable Nazi electoral success between 1930 and 1933 suggests this was largely related to the Treaty of Versailles and the Great Depression (high unemployment and financial instability). However, these factors cannot fully account for the Nazi's electoral success. Alternatively it has been speculated that fiscally contractionary austerity measures, including spending cuts and tax rises, contributed to votes for the Nazi party especially among middle-and upper-classes who had more to lose from them. Galofré-Vilà, Meissner, McKee, and Stuckler use voting data from 1,024 districts in Germany on votes cast for the Nazi and rival Communist and Center parties between 1930 and 1933, evaluating whether radical austerity measures, measured as the combination of tax increases and spending cuts, contributed to the rise of the Nazis. Their analysis shows that chancellor Brüning's austerity measures were positively associated with increasing vote shares for the Nazi party. Depending on how we austerity is measured and the elections considered, each 1 standard deviation increase in austerity is associated with a 2 to 5 percentage point increase in vote share for the Nazis. Consistent with existing evidence, the researchers find that unemployment rates were linked with greater votes for the Communist party. Their findings are robust to a range of specifications including a border-pair policy discontinuity design and alternative measures of radicalization such as Nazi party membership. The coalition that allowed a majority to form government in March 1933 might not have been able to form had fiscal policy been more expansionary.

Robert A. Margo, Boston University and NBER

The Integration of Economic History into Economics (NBER Working Paper No. 23538)

In the U.S. today, the academic field of economic history is much closer to economics than it is to history in terms of professional behavior, a stylized fact that Margo calls the "integration of economic history into economics." Margo documents this using two types of evidence -- use of econometric language in articles appearing in academic journals of economic history and economics, and publication histories of successive cohorts of Ph.D.s in the first decade since receiving the doctorate. Over time, economic history became more like economics in its use of econometrics and in the likelihood of scholars publishing in economics, as opposed to, say, economic history journals. But the pace of change was slower in economic history than in labor economics, another subfield of economics that underwent profound intellectual change in the 1950s and 1960s, and there was also a structural break evident for post-2000 Ph.D. cohorts. To account for these features of the data, Margo sketches a simple, "overlapping generations" model of the academic labor market in which junior scholars have to convince senior scholars of the merits of their work in order to gain tenure. Margo argues that the early cliometricians -- most notably, Robert Fogel and Douglass North -- conceived of a scholarly identity for economic history that kept the field distinct from economics proper in various ways, until after 2000 when their influence had waned.

Farley Grubb, University of Delaware and NBER, and Cory S. Cutsail, IMA consulting

Colonial North Carolina's Paper Money Regime, 1712-1774: Value Decomposition and Performance

The North Carolina's assembly emitted its own paper money and maintained some amount in public circulation during its entire history as a separate colony. No systematic or statistical analysis of North Carolina's paper money regime exits in the literature. Grubb and Cutsail model and estimate how the market value of this money was determined. They compare the quantity theory of money with an asset-pricing model to see which explains the observed market value of the paper money better. Finally, the researchers explore counterfactual redemption architectures to show how redemption affected monetary performance in periods of value collapse.