Development of the American Economy

Members of the NBER's Development of the American Economy Program met March 23 in Cambridge. Program Directors Leah Platt Boustan of Princeton University and William J. Collins of Vanderbilt University organized the meeting. These researchers' papers were presented and discussed:

Lisa D. Cook, Michigan State University and NBER

A New National Lynching Data Set and New Explanations for Lynching Behavior in the United States from 1684 to 1983

Prottoy Akbar and Sijie Li, University of Pittsburgh, and Allison Shertzer and Randall Walsh, University of Pittsburgh and NBER

Racial Segregation in Housing Markets and the Erosion of Black Wealth

Housing is the most important asset for the vast majority of American households and a key driver of racial disparities in wealth. Akbar, Li, Shertzer, and Walsh study how residential segregation by race eroded black household wealth. Using a novel sample of matched addresses from prewar American cities, they find that rental prices and occupancy soared by about 40 percent in blocks that transitioned from all white to majority black. However, home values fell on average by 10 percent over the first decade of racial transition and by a staggering 50 percent in major African American destinations such as Chicago, Philadelphia, and Detroit. The findings suggest that, because of the segregated housing market, black families faced dual barriers to wealth accumulation: they paid more in rent for similar housing while the homes they were able to purchase rapidly declined in value.

Ariell Zimran, Vanderbilt University and NBER

Transportation and Health in a Developing Country: The United States, 1820-1847

Zimran studies the impact of transportation on health in the rural US, 1820-1847. Measuring health by average stature and using within-county panel analysis and a straight-line instrument, Zimran finds that greater transportation linkage, as measured by market access, in a cohort's county-year of birth had an adverse impact on its health. A one-standard deviation increase in market access reduced average stature by 0.10 to 0.29 inches, explaining 26 to 65 percent of the decline in average stature in the study period. Zimran finds evidence that transportation affected health by increasing population density, leading to a worse epidemiological environment.

Shawn E. Kantor, Florida State University and NBER, and Alexander T. Whalley, University of Calgary and NBER

Space Race: Automation Innovation and Labor’s Share

Labor's share has declined across a broad range of industries in many economies around the world over the last 50 years. Kantor and Whalley examine the effects of one of the largest public investments in science of the 20th century to understand how automation innovation affects the labor share over the long term. The Space Race -- launched in response to the Soviet Union's Sputnik Satellite in 1957 -- represents a shock to local automation innovation, which occurred virtually independent of local labor market conditions. The researchers' analysis of city-industry level Manufacturing Census and National Aeronautics and Space Administration (NASA) publications data from 1947 to 2012 reveals two main findings. First, labor share fell five years after local NASA innovation shocks occurred. Over the longer-term, as firms and workers adjusted, labor's share increased in response to NASA technology shocks. The analysis sheds new light on the dynamics of the impact of automation technology on workers.

Andrew Goodman-Bacon, Vanderbilt University and NBER, and Lucie Schmidt, Williams College and NBER

Federalizing Benefits: The Introduction of Supplemental Security Income and the Size of the Safety Net

In 1974, Supplemental Security Income federalized the previously state-run cash welfare programs for the aged, blind, and disabled, imposing a national minimum benefit and standardized eligibility criteria. Because of pre-existing variation in generosity, SSI raised benefits more in some states than others, but had no effect on benefits in states that were above its benefit floor. Goodman-Bacon and Schmidt show that SSI increased the size of disability transfer programs in states with the lowest pre-SSI benefit levels, but shrank non-disability transfer programs such as Aid to Families with Dependent Children and General Assistance. For every four new SSI recipients brought onto the program by benefit increases, three came from other welfare programs. Each dollar of per-capita income transferred through SSI increased total per-capita transfer income by just over 50 cents.

Joshua K. Hausman and Paul Rhode, University of Michigan and NBER; and Johannes Wieland, University of California, San Diego and NBER

Farm Prices, Redistribution, and the Severity of the Early US Great Depression

Hausman, Rhode, and Wieland argue that falling farm prices, incomes, and spending explain part of why the contraction in the first year of the U.S. Great Depression was so severe. Cross-state data show that more farm-intensive areas of the country -- in particular areas growing traded crops whose real prices fell most -- suffered more in the first year of the Great Depression. County auto sales data from Ohio generally support this finding. Farmers were heavily indebted in 1929, thus the negative shock to their income likely had large effects on their spending. Reasonable assumptions about the pass-through of farm prices to retail prices and the marginal propensity to spend of farmers relative to non-farmers suggest that the collapse of farm product prices in 1930 was an important propagation mechanism worsening the Great Depression.

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