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Closing Time: The Local Equilibrium Effects of Prohibition

Published online by Cambridge University Press:  03 September 2021

Greg Howard  and
Arianna Ornaghi
Greg Howard
Affiliation:
Assistant Professor, University of Illinois, 1407 W. Gregory Dr. Office 10, Urbana, IL 61801. E-mail: glhoward@illinois.edu.
Arianna Ornaghi*
Affiliation:
Postdoctoral Research Fellow, University of Warwick, Department of Economics, Coventry CV4 7AL, United Kingdom.
*
E-mail: a.ornaghi@warwick.ac.uk
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Abstract

How do different local policies in a federal system affect local land values, production, and sorting? We study the question exploiting a large historical policy change: U.S. Alcohol Prohibition in the early twentieth century. Comparing same- state early and late adopters of county dry laws in a difference-in-differences design, we find that early Prohibition adoption increased population and farm real estate values. Moreover, we find strong effects on farm productivity consistent with increased investment due to a land price channel. In equilibrium, the policy change disproportionately attracted immigrants and African-Americans.

Type
Article
Information
The Journal of Economic History , Volume 81 , Issue 3 , September 2021 , pp. 792 - 830
Copyright
© The Economic History Association 2021

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Footnotes

We would like to thank Alex Bartik, Camilo García-Jimeno, Jason Faberman, James Fenske, Jack Liebersohn, lunch participants at Warwick and Illinois, and conference participants at the European UEA Meetings, the International AREUEA Meetings, and the European Economic Association Meetings. We would also like to thank Eric Hilt and two anonymous referees for their insightful comments. We received funding for the project from the Centre for Competitive Advantage in the Global Economy at the University of Warwick.

References

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