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Trial By Fury: Lawlessness and Post-Reconstruction Southern Development
Art Carden*
Department of Economics
Washington University in Saint Louis
[email protected]
http://economics.wustl.edu~carden
Draft. Not for citation or distribution.
Abstract
The southern United States’ relatively poor economic performance since the end of the
Civil War has been the subject of a great deal of scholarly discussion. Using state-level
data for 1900 and 1920 and data on lynching as a proxy for the rule of law, I account for
the impact of the weak institutions on post-reconstruction economic performance.
* PhD student (economics), Washington University in Saint Louis. I gratefully acknowledge the comments
and suggestions of Douglass C. North, John Nye, Jeremy Meiners, Tara Sinclair, Marc Treutler, and
seminar participants at Washington University in Saint Louis and the Institute for Humane Studies.
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There exists among us by ordinary—both North and South—a profound
conviction that the South is another land, sharply differentiated from the rest of
the American nation, and exhibiting within itself a remarkable homogeneity.
As to what its singularity may consist in, there is, of course, much conflict
of opinion, and especially between Northerner and Southerner. But that it is
different and that it is solid—on these things nearly everybody is agreed. Now
and then, to be sure, there have arisen people, usually journalists or professors,
to tell us that it is all a figment of the imagination, that the South really exists only
as a geographical division of the United States and is distinguishable from New
England or the Middle West only by such matters as the greater heat and the
presence of a larger body of Negroes. Nobody, however, has ever taken them
seriously. And rightly.
--W.J. Cash, The Mind of the South
I. Introduction
Why was the south so poor from the end of Reconstruction through World War
II? More broadly, what can the wealth (or poverty) of the post-reconstruction south tell
us about the wealth of nations? To what extent did the structure of formal and informal
institutions contribute to the south’s difficulties? What can the performance of the postreconstruction south tell us about modern economies?
In this essay, I focus on the relationship between institutions and development.
This study contributes several things. First, it contributes additional evidence to the
growing body of empirical literature showing that institutions are key determinants of
economic growth. Second, I contribute to the specific body of literature using cross-state
rather than cross-country variation to explain how institutions and other factors affect
incomes. More importantly, it contributes new data on the gruesome practice of
lynching, which I use to proxy for the strength of the rule of law. Third, it adds to a
literature that considers productivity levels rather than productivity growth rates.1
Finally, it contributes evidence that may help us understand the isolation of the southern
labor market.
1
See Mitchener & McLean (2003) for a discussion of these essays.
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The southern economy’s dismal performance is a mystery. Table 1 and Figure 1
illustrate income trends across US regions as reported by Easterlin (1971).2 Southern
incomes languished relative to northern incomes during the decades following the war
and reconstruction. While the south made modest relative gains in the beginning of the
twentieth century, the region only began sustained catch-up after World War II.3 Reid
(1973), Easterlin (1971), and others provide data on incomes showing that the south was
relatively rich before the war, with per-capita income almost equal between north and
south (slaves included). By 1880, southern incomes were barely half of northern
incomes. Southern incomes grew at the same rate as northern incomes for the next
twenty years before the southern economy stagnated again in decades preceding World
War II (Connolly, 2004).
Southern economic history is the subject of a large literature; however, analysis of
southern institutions has suffered from a lack of data that captures cross-state variation in
the quality of institutions.4 In this essay, I address matters of differential economic
performance using a new proxy for the strength of the rule of law: lynching. By way of
preview, I show that the strength of the rule of law was important by regressing statelevel measures of economic performance on several inputs and the rate of persons
lynched per 100,000 capita. I show that the coefficient on this proxy is negative and
significant across a broad class of specifications, indicating that weak institutions reduce
economic performance independent of their effect on factors of production.
2
Curiously, these data indicate that divergence may have occurred before the War. Coclanis (2000) makes
this point.
3
Barro & Sala-i-Martin (1991,1992) discuss conditional convergence in the American states. Wright
(1986) and Alston & Ferrie (1999) discuss post-WWII southern catch-up.
4
See Wright (1982) for a survey of the major contributions to southern economic history.
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Lynching is an attractive proxy for the strength of the rule of law for several
reasons. First, it persisted into the middle of the twentieth century, as Figure 2 indicates.
Second, the practice was not exclusively racist—during the early years for which data
were kept, more whites were lynched than blacks, especially in the western states.
Thirds, lynching was largely and unambiguously lawless, though it may have substituted
for state-provided justice in some instances. Jurist C.B. Lore5 wrote that “law has its
highest function in throwing its shield of protection as a barrier before the ignorant, the
weak, and the helpless” and that a “calm, just, and fair hearing” was especially necessary
in cases of grievous crime. Lynching stood in direct opposition to this “highest
function.”
Fourth, lynching was highly correlated with weak institutions and would be easier
to interpret than other proxies for the strength of the institutional environment (such as
various measures of the “legacy of slavery”). High lynching rates indicated that property
rights were poorly enforced.6 This manifested itself in lower incomes. Fifth, lynching
did not merely punish iniquity. The entire practice was designed to terrorize an entire
populace.7 Indeed, the historical and sociological literature on lynching examines the
practice as a method of economic and social control. As we will see, “social control”
through illiberal institutions hampered southern markets and reduced economic
performance. Finally, the practice of lynching is illustrative of what happens when one
organization has a monopoly on legitimate coercion. Instead of specifying and enforcing
5
Quoted in Grant (1974:106).
I assume here that human rights are a subset of property rights.
7
In the 1948 federal anti-lynching hearings, lynching is defined as violent activity aimed at terrorizing a
segment of the population.
6
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property rights, as states are in a position to do8, state and local governments were (in
many cases) complicit in the perpetuation of terrorist regimes. This suggests a “state
failure” in the market for protection.
This study also has broad implications for how we understand the process of
economic change over time. I address three important problems in the literature on
economic growth and in the literature on the economic history of the south. First, I offer
evidence that a weak rule of law (as measured by the rate of lynchings per 100,000
capita) is negatively correlated with economic performance independent of its negative
effects on factors of production. Models controlling for endogeneity with an instrumental
variable—a lagged value of lynching—give us reason to believe that the lynching causes
low productivity. Second, I contribute to the literature on the economic history of the
south by offering quantitative evidence that anti-social institutions reduced productivity
and may have contributed to the south’s development as a “low wage region in a high
wage country” (Wright, 1986). Finally, racially-motivated domestic terrorism in the
post-reconstruction south may teach us valuable lessons about economic development in
impoverished, racially polarized countries today. While the post-reconstruction south is
not precisely analogous to the situation in Iraq, the Sudan, and other areas stricken by
poverty and racial strife, the general patterns of such violence may yet be instructive. In
particular, the problem of lynching indicates that competition in the market for protection
and justice may be superior to monopoly.
The rest of the essay proceeds as follows. The next section discusses the
literature on institutions, lynching, and the economic performance of the south. Section
III discusses the theoretical and historical relationship between lynching, law, and
8
See North (1981) and Barzel (2002) for discussions of the theory of the state.
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economic performance. I discuss the empirical model in Section IV, the data in section
V, and empirical results in section VI. Section VII concludes and offers directions for
further research.
II. Institutions, Lynching, and Southern Economic History9
The essence of the problem is best stated by Ransom & Sutch (2001:xiii), who
write that
Southern agriculture stagnated while an agricultural revolution transformed the rest of
rural America. The South’s industrial sector remained small and backward during the
age of American industrial growth. And Southern people—white as well as black—
were among the poorest, least educated, and most deprived of all Americans at a time
when America was becoming the richest, best educated, most advantaged nation in
the world.
Dixie’s plight remains a mystery. In open defiance of the factor price equalization
theorem, southern poverty persisted well into the middle of the 20th century. It is unlikely
that we will be able to trace poor southern economic performance to a single causal
factor, but the literature on different aspects of the southern economy is quite large.
Bateman & Weiss (1977) and Carlton & Coclanis (2003) consider the failure of
industrialization in a slave society. DiLorenzo (2002) attributes southern poverty to state
intervention during Reconstruction (the do-called “Dunning School” interpretation),
Danhof (1964) summarized the pre-cliometric literature on southern economic
performance, and Wright (1982) discusses the literature on southern economic
development as it developed during the height of the cliometric revolution.
9
This draws heavily from the discussion in Carden (2004a).
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A rich vein of literature examines the impact of the Civil War and the legacy of
slavery. Engerman (1971) blames poverty wartime destruction. Fogel & Engerman
(1974) is the classic work on the economics of slavery, while Higgs (1977) discusses the
experience of blacks in the post-reconstruction American economy, Margo (1990),
Connolly (2004), and Moehling (2004) discuss the political economy of education and
the role of human capital, and Ransom & Sutch (1977) considers structural shifts as a
result of emancipation and the role of capital markets.10 Virts (1991), Irwin (1994), and
Garrett & Xu (2002) examine the productive efficiency of southern agriculture after the
collapse of the plantation system.
The literature on southern institutions is also extensive. Alston & Ferrie (1993, 1999)
consider paternalism and contracting in an environment of insecure property rights.11
Genovese (1968, 1974) provides historical narrative on paternalism, and the essays in
Glymph (1985) follow this tradition. Wright (1978, 1986) offers two broad volumes on
the economic history of the south, hypothesizing that the isolated southern labor market
caused lackluster performance.12 Another valuable contribution is Weiner’s (1979)
discussion of Alabama’s evolution as an “Old South” state.
More broadly, the research agenda of the New Institutional Economics argues that
the formal rules, informal norms, and enforcement mechanisms that shape the structure of
incentives in a society are the fundamental factors that determine an economy’s
performance. North (1981, 1990, 2004), Davis & North (1971) and North & Thomas
(1973) are among the foundational works in the literature on the economics of
10
See also James (1981).
See also Alston & Higgs (1982) for a discussion of southern contractual arrangements. Garrett & Xu
(2002) argue that sharecropping was an efficient response to insecure institutions.
12
Rosenbloom (1996) offers empirical evidence supporting Wright’s thesis.
11
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institutions, while Barzel (1997, 2002) discusses the economics of property rights and the
theory of the state.13
A growing empirical literature supports the link between institutions and economic
performance. Acemoglu, Johnson, & Robinson (2001), Rodrik, Subramanian, & Trebbi
(2001), Adkins, Moomaw, & Savvides (2002), and Klein & Luu (2002) all argue that
institutions and policy stability are important factors shaping the structure of incentives
and therefore economic performance.14 Recently, Mitchener & McLean (1999, 2003)
have examined ultimate causes of variation in labor productivity across states. They focus
on institutional and geographic variables in order to get at ultimate rather than proximate
causes for performance and find that navigable waterways, large mineral endowments,
and no slaves in 1860 are correlated with higher labor productivity.15
Three important facts characterize southern economic history: income divergence
(Reid, 1973), persistent poverty (Wright, 1986), and conditional convergence (Barro &
Sala-i-Martin, 1991, 1992). Weak institutions and insecure property rights in the postreconstruction era may explain why the southern economy performed so poorly in the
late 19th and early twentieth centuries. In the next section, I discuss how lynching might
have affected development and how it might serve as an acceptable proxy for the
character of the institutional environment.
13
Broad surveys of the literature in the New Institutional Economics can be found in Furubotn & Richter
(1998) and Klein (2000). McQuade (2000) summarizes some of the economics of institutions in the history
of economic thought.
14
See also the essays in Alston, Eggertson, and North (1996) and Libecap (1989) for more examples.
15
Lynching per se is the subject of a large literature in the historical, sociological, and psychological
sciences. Early scholarly studies of lynching include Cutler (1905), Mims (1926), and White (1929). The
essays in Finkelman (1992) document specific lynchings and review some of the historical and sociological
literature on the practice, and Tolnay & Beck (1995) and Dray (2002) are two of the most systematic
treatments. Recent sociological studies of lynching include Clarke (1998), Stovel (2001), and Olzak
(1990). Relevant historical studies include Grant (1974) and Shapiro (1988). Berkowitz & Clay (2004) use
lynching as a proxy for the rule of law to explain the quality of modern-day judicial institutions.
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III. Sowing the Seeds of Strange Fruit: Lynching in Theory and History
Lynching affects economic growth in several ways. It might improve the
performance of a chaos-stricken by acting as an effective substitute for public law, and it
might hinder economic performance by increasing uncertainty and by reducing returns on
investment in physical capital, human capital, and the stock of knowledge.
On some margins, lynching reduced the uncertainty associated with post-war
social upheaval, increased the costs of vagrancy, and imposed order on southern labor
markets. As Tolnay and Beck (1995) and Stovel (2001) argue, whites used lynching as a
form of social control. Blacks were viewed as an economic, political, and social threat—
after abolition (and with reconstruction governments safely deposed), racist violence
substituted for the lash. By keeping blacks safely below whites in the eyes of the law,
rich white landlords were able to gain considerable bargaining power and poor white
laborers were able to reduce competition for their services.
Lynching also imposed order on the southern labor market. A perceived labor
shortage meant competition in the labor market. Long-run investment decisions were
affected by the prospect of seeing one’s laborers “enticed” by a competing plantation.
From the landlord’s perspective, lynching reduced uncertainty by increasing the costs of
moving from plantation to plantation (or of leaving the south) and by increasing the cost
of hiring labor from other plantations.16 Superficially, these reductions in uncertainty
should have increased productivity.
While lynching may have reduced uncertainty on some margins, it increased
uncertainty and altering incentives on others. Lynching retarded economic performance
16
Weiner (1979) documents several instances in which the Ku Klux Klan lashed out against blacks who
tried to leave their plantations and against plantation owners who offered inducements to blacks on other
plantations.
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in two ways. First, lynching altered incentives for members of the victim group to
acquire physical and human capital, to open businesses, or to improve assets. In other
words, lynching reduced expected returns to entrepreneurship and investment. Second,
lynching increased transaction costs in labor markets.17 This made labor markets less
competitive, reduced incentives for whites to invest in human capital, and impeded the
social division of labor.
Proximate causes of the wealth of nations include physical and human capital, the
stock of useful knowledge, population growth, and extension of the division of labor
(Mokyr, 1990). All of these were sharply curtailed by the lawless environment that
characterized the post-reconstruction southern economy. Lynching sharply reduced the
flexibility and efficacy of post-bellum markets for labor, capital, human capital, or new
knowledge. Lynch mobs’ efforts were intended to reduce blacks’ access to labor markets
and to physical and human capital.
In large part, they succeeded. On the demand side, lynching altered blacks’
incentives to invest. While blacks made impressive gains after reconstruction (Higgs
1977), lynching affected incentives to invest in several ways. First, it reduced blacks’
expected returns on investment. Second, lynching increased blacks’ time preference by
reducing their life expectancy.18 Third, lynching reduced competitive pressure on poor
whites and reduced their incentive to invest. Fourth, lynching reduced the demand for
black labor and again decreased blacks’ expected return on investment in human capital.
17
North (1981) defines transaction costs as the costs of measuring the valuable characteristics of goods and
services and the costs of specifying and enforcing agreements.
18
For a complete discussion of time preference, interest, and capital accumulation, see Mises (1949),
Reisman (1996), and Rothbard (1962 [2004]).
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Lynching also affected the supply side of the market for human capital. Some
planters and social reformers worked to provide blacks with educational opportunities;
however, their efforts were often in vain. Alabama planter Pearson J. Glover (and the
teacher he hired) faced Klan terror when he tried to lure black labor by building a school
on his plantation.19 Robert E. Lee Wilson built a school for his tenant farmers only to see
the school burned the night before it was to be dedicated.20
North (1981) writes that changes in the stock of useful knowledge are integral to
long-run economic growth. During the Second Economic Revolution, the supply curve
for new knowledge became more elastic and innovation was “built in” to the economic
system. Lynching isolated southern markets from the rest of the world and thereby
incentives to innovate. For blacks, the expected returns to contributions to new
knowledge were relatively low. Whites who didn’t have to fear black competition also
had reduced incentives to innovate and contribute to the stock of useful knowledge. In
addition, a stock of artificially cheap labor held in place by institutions that prevented
labor markets from clearing meant that production would remain relatively labor
intensive.
Lynching affected the labor market in two ways. First, it placed bargaining power
squarely in the hands of landlords. They were able to exercise a degree of monopsony
power over tenants who were prevented from leaving the plantation or migrating North
by Klan violence. Immobile black labor also meant that they had a degree of power to
renege on agreements. Informal collusive agreements between landlords were enforced
by the possibility of social sanction or Klan violence.
19
20
Wiener (1979) discusses the Glover case in greater detail.
See Mims (1926) for a complete discussion.
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Wright (1986) blames southern poverty on the south’s relative isolation from the
national labor market. Klan violence perpetuated disequilibrium in the national labor
market or perhaps more accurately, prevented labor market integration by punishing
blacks who tried to leave the south. For example, blacks attempting to emigrate from
Marengo County, Alabama were stopped and their lives were threatened on account of
the fact that the Ku Klux Klan did not want to see the county “deprived of their labor.”21
Obviously, those attempting to emigrate expected to find better opportunities
elsewhere. Evidence on wages indicates that these expectations were correct. Thus,
restricting the mobility of black labor reduced welfare by preventing trades that would
have been made in the absence of Klan intervention. Ceteris paribus, reducing labor
mobility should reduce labor productivity.
One goal of domestic terrorism was to keep blacks “in their place.” In a wellfunctioning market economy, the proper “place” for a man, woman or child white or
black is wherever prices guide them (Mises 1949, Higgs 1977). Lynching, however,
impoverished the south by preventing the price mechanism from allocating resources
effectively and efficiently.
IV. Empirical Model & Data
In a summary of cross-country studies, Caselli (2004) argues that the wealth of
nations has its roots in two proximate causes: factors of production and efficiency. I use
simple econometric tests to gauge the extent to which lynching contributed to lackluster
performance. Following Mitchener & McLean (2003: 101) I “find in the historical
experience of the United States a fruitful natural extension of the cross country
21
So said William B. Jones, a Marengo County planter and mayor of Demopolis, AL, as quoted in Wiener
(1978:63).
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approach.” 22 They write that “the analysis of states may offer a more fertile testing
ground for competing hypotheses because, unlike countries, states share a common
language, a similar culture, and likely have the same access to new technologies”—
factors that are difficult to control for in cross-country studies.
The trends in this literature are twofold. First, the literature has shifted away from
analysis of proximate causes and toward analysis of ultimate causes. Second, the
literature has shifted away from analysis of growth rates and toward analysis of income
levels. For example, Mitchener and McLean (2003) use data on labor productivity and
proxies for underlying causal factors to find that institutions and geography both played a
major role in the economic development of American states.
I extend this approach within the framework outlined by Parker (1984) and Mokyr
(1990a, 1990b). They divide the processes of economic growth into four categories:
Schumpeterian (technological change), Solovian (capital deepening), Simonian23
(economies of scale and knowledge spillovers from population growth), and Smithian
(extension of the division of labor). Schumpeterian, Solovian, and Simonian growth are
movements of a production possibilities frontier and implicitly assume that input or
technological constraints prevent economies from growing. Smithian growth, on the
other hand, defines movement within a production possibilities frontier and is
fundamentally institution-oriented. High transaction costs may leave production
possibilities unexploited and retard the social division of labor.
22
See Barro & Sala-i-Martin (1991, 1992). Connolly (2004) summarizes the literature on growth
accounting.
23
The term “Simonian” does not appear in Mokyr (1990a) or Mokyr (1990b). Mokyr attributes the
phenomenon of growth resulting from scale economies in population to Ester Boserup and Julian Simon, so
I call it “Simonian growth” to maintain the alliterative nature of the category labels.
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A first pass at the relationship between lynching and economic growth requires
that we determine the extent to which lynching impacted other factors of production—
physical capital, human capital, changes in the stock of knowledge, and population
considerations. Productivity increased while lynching declined over time; the availability
of panel data allows me to estimate a period fixed effects model to control for these
without sacrificing many degrees of freedom. To determine the extent to which lynching
curtailed factor accumulation, I estimate the following model:
(growth factor)it = β0 + γinstitutions(lynching victims/population)it + µit
(1)
I estimate four different equations, where “growth factor” is the capital-labor
ratio, Connolly’s measure of human capital per capita, patents per 100,000 capita, and
urbanization. µit is an error term comprised of αt + εit, where αt the period fixed effect
and εit is a white-noise disturbance term. Results are reported in table 2.
To determine the extent to which lynching reduced incomes, I let output depend
on five factors: physical and human capital (Solovian factors), technology and
inventiveness (Schumpeterian factors, using the patent rate as a proxy), economies of
scale and externalities from population growth (Simonian factors, using urbanization as a
proxy), and institutions (Smithian factors, using the lynching rate as a proxy).
Mathematically,
(economic performance)it = βk(capital/labor)it + βh(human capital/labor)it +
βpatents(patents/population)it + βdensity(population/land area)it + γinstitutions(lynching
victims/population)it + µit
(2
I use two different measures of economic performance. Measures of per capita
income are from Perloff et al (1966), and measures of labor productivity are from
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Mitchener & McLean (2003). Data on population the manufacturing capital stock, urban
population, and the size of the labor force are from Kuznets and Thomas (1957), and
proxies for education-based human capital are from Connolly (2004).24 I broaden the
definition of capital to include capital in agriculture, as well. Census data on capital in
agriculture are provided by the University of Virginia’s Geospatial and Statistical Data
Center (1998), but this does little to change the qualitative results.25 Data on patents are
calculated as three-year centered averages taken from the Annual Report of the US
Commissioner of Patents and the Official Gazette of the US Patent Office for various
years.26 Data on lynching victims per 100,000 capita are taken from NAACP (1969) with
the total number of lynchings 1899-1903 correlated with income in 1900 and the number
of lynchings from 1914-1918 correlated with income in 1920. In the instrumental
variables specification, I use the number of lynchings from 1889-1893 and 1909-1913 as
lagged values of lynching. µit is an error term comprised of αt + εit, where αt the period
fixed effect and εit is a white-noise disturbance term. To control for endogeneity, I also
estimate an instrumental variables specification using lagged values of the lynching rate
as an instrument for contemporaneous lynching rates.27 I adopt White’s
heteroskedasticity-consistent covariance matrix to control for heteroskedasticity. All
24
Special thanks are due to Michelle Connolly for generously sharing her data. Details on data
construction are contained in her appendix.
25
Results of these regressions are not reported here and are available upon request. Empirical findings
regarding lynching are robust to these specifications.
26
See Higgs (1971) Carlton & Coclanis (1995) for another study attempting to explain inventiveness using
these data. The data for 1920 are centered on 1918 due to data limitations.
27
Recent studies using instrumental variables to control for the endogeneity of institutions include
Acemoglu, Johnson, & Robinson (2001), Rodrik, Subramanian, and Trebbi (2001), and Mitchener &
McLean (2003).
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values are adjusted with the price deflators in Johnston and Williamson (2004), and all
variables except the lynching rate are in natural logarithms.28
V. Results
Lynching mattered. Table 2 reports univariate regression estimates of Solovian,
Schumpeterian, and Simonian factors on lynching to determine whether or not lynching
had any effect on the position of the southern production possibilities frontier. These
crude regressions suggest that higher lynching resulted in lower levels of capital
accumulation, human capital formation, and inventive activity. Lynching is also
negatively correlated with urbanization. The direction of causation is ambiguous;
lynching was largely a rural phenomenon, and it may be that urban sophisticates would
look down on such a brutal practice. On the other hand, one of the lynchers’ goals was to
tie black sharecroppers and tenant farmers to the land and to prevent them from
migrating. Lynching may have thwarted urbanization, and this should provide fertile
ground for further research. While these regressions indicate that lynching affected
factor accumulation, additional sensitivity and robustness checks are necessary before we
can reach definitive conclusions.
Tables 3 and 4 report results regression results for different specifications of
equation (2). Lynching is negative after controlling for other Parker-Mokyr growth
factors and period fixed effects.29 Lynching is barely insignificant in most of these
specifications, though an instrumental variables specification using a broader measure of
the capital stock (capital invested in manufacturing plus capital invested in agriculture) in
28
The independent variables are highly correlated, which may generate problems associated with
multicollinearity. However, eliminating multicollinearity strengthens the results.
29
Regional dummy variables were unimportant in many specifications. These regressions are available
upon request.
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the regression equation and using a lagged value of lynching victims per 100,000 capita
as an instrumental variable returns a significant and positive coefficient on lynching.30
This suggests that lynching may have had some uncertainty-reducing properties and that
a longer-run investigation is in order.
Table 4 presents a clearer and more intuitive picture. The impact of lynching on
labor productivity is stronger than its impact on per capita income. Again controlling for
endogeneity using an instrumental variables specification with a lagged value of lynching
as an instrument, it appears that the direction of causality runs from lynching to labor
productivity rather than in the other direction.
While the results are strong across a range of specifications, several caveats are in
order. Curiously, coefficient on the capital-labor ratio is negative across a variety of
specifications, most returning coefficients that are significant at the 1% level. This
suggests two possibilities. The return to capital deepening was apparently low. It may be
that other factors highly correlated with the capital stock are in fact picking up the returns
to capital.31 Additional investigation is warranted.
The returns to education-based human capital were large and positive, which is
consistent with Connolly’s (2004) findings. The estimated return to a 10% increase in
human capital is in the neighborhood of a 1.6% increase in labor productivity and a 2%
increase in per capita income. Combined with the large effects of increases in lynching
on human capital formation, this indicates that lynching did far more damage than its
small-but-significant independent effect suggests.
30
Increases in the standard errors of the coefficients because of multicollinearity may cause us to
underestimate the statistical significance of the coefficients.
31
Returns to capital are positive in univariate regressions.
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Inventiveness was also an important component of high labor productivity.
Advances in technology and changes in the stock of useful knowledge yielded higher
levels of economic performance. While Dixie could import northern technology, she
perhaps lacked the complementary factors of production necessary to use it as effectively
as possible. This failure to develop an indigenous technological community was highly
correlated with low income.32
These preliminary regressions return “positive and significant” coefficients on
urbanization.33 These coefficients are small relative to the returns to human capital and
high relative to the returns on physical capital, ranging from 0.22% of labor productivity
to 0.35% of per capita income depending on the model specification. Externalities,
additional entrepreneurial opportunities, and the possibility of a more extensive social
division of labor meant substantial increases in labor productivity and income.
Did lynching frustrate the social division of labor? Evidence suggests that it did.
In models of labor productivity, coefficients on a broad measure of lynching are
statistically significant but small. The coefficient ranges between -0.05 and -0.09,
meaning that an additional lynching per 100,000 would lead to approximately a $1
decrease in labor productivity. This appears to be small; however, the effects were
pronounced once aggregated across an entire population. What’s more, the relatively low
opportunity cost per capita may in part explain why lynching persisted as long as it did.
For those willing to pay (Klansmen, for example), the foregone income was a bargain.
For those who weren’t, the pecuniary externality was too small to induce them to
overcome the collective action problem needed to restore law and order. The
32
See Carlton & Coclanis (1995) and Connolly (2004) for complete discussions.
For entertaining and informative discussions of the “cult of significance,” see McCloskey (Rhetoric of
Economics) and McCloskey & Ziliak (Standard Error of Regression, EJW article).
33
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specifications reported in tables 3 and 4 understate the impact of lynching on southern
economic performance because they consider only lynching’s independent effect on
income and labor productivity.34
VI. Conclusions and Further Directions
Southern poverty may have persisted in part because of weak institutions.
Lynching exerts a small-but-significant impact on labor productivity and per capita
income even after controlling for proximate factors that we expect to be highly correlated
with lynching. This effect must be larger than the measured effect because of lynching’s
impact on factors of production.
An obvious next step is to estimate lynching’s impact on labor productivity and
per capita income through its effect on factors of production. We have ample evidence
that one of the main reasons for racist violence in the south was to prevent southern
blacks from acquiring too much property or from investing in human capital. This
investigation should give us a truer picture of the impact of lynching and lawlessness on
economic performance.
Of particular interest is the impact of institutions on allocative and technical
efficiency. Recent developments in the literature on productivity analysis allow us to
estimate the extent to which insecure property rights lead to misallocated resources and
forgone opportunities for trade to the extent that data are available. In a related essay
(Carden, 2004b) I consider the impact of lynching on technical efficiency using
stochastic frontier techniques.
The data can be reduced to the county level, as well. While our interest in the
question of persistent southern poverty is fundamentally a “macro” phenomenon, the
34
I plan to pursue the impact of lynching manifested through other factors of production in future work.
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story of lynching is fundamentally a “micro” phenomeon. County-level data may present
a fuller picture of the impact of lawlessness on economic performance.
There are several important implications for this study. First, this study suggests
that lawlessness might explain, at least in part, the relatively poor performance of the
south through the early twentieth century. Second, this study suggests that in contrast to
the traditional interpretation of insecure property rights as an example of market failure,
historical evidence indicates that racist violence (manifested in lynching) was an example
of a situation in which the state was complicit in the very activities that they were
supposed to prevent. The state was a monopolist on coercion, and they behaved
monopolistically. This aspect of the lynching era also warrants further investigation.
In summary, I have done two things. First, I report results of preliminary
investigations of the effect of lawlessness on factors of production. Results suggest that
lynching retarded states’ ability to form factors of production. Second, this essay reports
results indicating that lynching reduced state-level economic performance independent of
its impact on factors of production. This carries us a little closer to explaining the
relatively poor performance of the southern economy and to explaining the impact of
lawlessness on economic performance. It also opens an extensive research agenda on the
relationship between lawlessness, lynching, and economic performance.
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Table 1. Personal income Per Capita by Region as percentage of US average, 1840-1950
1840
1860
1880
1900
1920
1930
1940
US
100
100
100
100
100
100
100
Northeast
135
139
141
137
132
138
124
New England
132
143
141
134
124
129
121
Middle Atlantic
136
137
141
139
134
140
124
North Central
68
68
98
103
100
101
103
E. NC
67
69
102
106
108
111
112
W. NC
75
66
90
97
87
82
84
South
76
72
51
41
62
55
65
South Atlantic
70
65
45
45
59
56
69
E. SC
73
68
51
49
52
48
55
W. SC
144
115
60
61
72
61
70
West
190
163
122
115
125
Mountain
168
139
100
83
92
Pacific
204
163
135
130
138
Notes:
Delaware and MD are included in Middle Atlantic
WNC: MN, NSD, NE, KS are excluded in 1840
SA: DE, MD, DC excluded
WSC: OK & TX excluded, 1840
1860 & 80: OK excluded
1860: MT, ID, WY, AZ excluded
Source: Easterlin (1971)
1950
100
115
109
116
106
112
84
73
74
62
80
114
96
121
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Table 2: Lynching and Factors of Production
Dependent Variable
Constant
Capital
Hum. Capital
Patents
0.43***
7.68***
31.9***
(0.009)
(0.047)
(0.70)
Lynching
-0.019**
-0.25***
-1.944***
(0.009)
(0.07)
(0.63)
R-Square
0.36
0.14
0.06
Adj. R-Square
0.35
0.12
0.04
Period Fixed Effects for 1900 & 1920. 48 cross sections, n = 96.
White's heteroskedacity-consistent standard errors.
Standard Errors in
Parentheses.
*-Denotes Significance at 10% level
**-Denotes Significance at 5% level
***-Denotes Significance at 1% level
Urbanization
0.37***
(0.007)
-0.012*
(0.063)
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Table 3: Factors Affecting Per Capita Income
Constant
7.28***
(0.42)
7.08***
(0.36)
IV
IV
7.23 ***
(0.36)
6.82***
(0.34)
North
West
CSA
Border
ln(mfg k)
-0.07***
(0.0098)
ln(mfg k + ag k)
ln(h)
ln(Urbanization)
ln(patents)
Lynching
Cross-sections
R-Square
Adj. R-Square
0.20***
(0.25)
0.39***
(0.07)
0.09
(0.05)
-0.009
(0.007)
46
0.87
0.86
-0.07***
(0.007)
-0.05***
(0.01)
0.21***
(0.03)
0.32***
(0.06)
0.08*
(0.04)
-0.01
(0.007)
46
0.87
0.86
*-Denotes Significance at 10% level
**-Denotes Significance at 5% level
***-Denotes Significance at 1% level
0.21**
(0.024)
0.39***
(0.07)
0.09*
(0.05)
0.002
(0.008)
46
0.87
0.86
-0.02
(0.01)
0.21***
(0.028)
0.33***
(0.07)
0.1**
(0.05)
0.02***
(0.004)
46
0.87
0.86
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Table 4: Lynching and Labor Productivity
IV
Constant
ln(mfg k)
8.53***
(0.39)
-0.08***
(0.008)
ln(mfg k + ag k)
ln(h)
ln(Urbanization)
Ln(patents/100,000)
Lynching/100,000
Cross-sections
R-Square
Adj. R-Square
Period Fixed Effects
for 1900 & 1920.
Standard Errors in
Parentheses.
*-Denotes
Significance at 10%
level
**-Denotes
Significance at 5%
level
***-Denotes
Significance at 1%
level
0.16***
(0.017)
0.33***
(0.06)
0.1**
(0.05)
-0.05***
(0.008)
48
0.88
0.88
7.63***
(0.34)
0.04***
(0.004)
0.16***
(0.015)
0.22***
(0.05)
0.10**
(0.04)
-0.04***
(0.006)
48
0.88
0.87
8.75***
(0.26)
-0.09***
(0.001)
0.16***
(0.02)
0.33***
(0.05)
0.07***
(0.024)
-0.1***
(0.004)
48
0.87
0.86
IV
7.77***
(0.23)
0.023**
(0.009)
0.16***
(0.02)
0.22***
(0.05)
0.09***
(0.03)
-0.06***
(0.004)
48
0.87
0.86
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Figure 1: Southern Income Per Capita as Perecentage
of Other Regions' Incomes, 1840-1950
120.0%
Northeast
100.0%
North Central
West
80.0%
60.0%
40.0%
20.0%
0.0%
1840
1860
1880
1900
1920
1930
1940
1950
Source: Easterlin (1971)
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Figure 2: Lynchings in the United States, 1882-1968
250
Whites
Blacks
150
Total
100
50
1966
1960
1954
1948
1942
1936
1930
1924
1918
1912
1906
1900
1894
1888
0
1882
Persons Lynched
200
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Figure 3: Causes of Lynchings, 1882-1968
45
40
35
Percent
30
25
20
15
10
5
All Other
Causes
Insult to
White
Person
Robbery
and Theft
Attempted
Rape
Rape
Felonious
Assault
Homicides
0
Figure 4: Lynching by Geographic Division, 1889-1918
800
700
North
600
South
500
West
400
300
200
100
0
18891903
18941898
18991903
19041908
19091913
19141918