The 1862 Homestead Act provided free land conditional on five years of residency and cultivation to settlers of the American West. In total, the Act granted 10% of the land in the United States to 1.6 million individuals. This study examines the impact of the Act on long-run development. Using spatial regression discontinuity and instrumental variable designs, we find that areas with greater historical exposure to homesteading are poorer and more rural today. The impact on development is not only driven through differences in the urban share of the population; cities in homesteading areas are less developed and non-agricultural sectors are less productive. Using newly geo-referenced historical census data, we document the path of divergence starting from the initial settlement. We find that homesteading regions were slower to transition out of agriculture. The historical and empirical evidence is consistent with the hypothesis that the transitory distortions caused by the Act’s residency and cultivation requirements induced selection on settlers’ comparative advantage in agriculture. This, in turn, inhibited the development of non-agricultural sectors and the subsequent benefits of agglomeration.
The legal doctrine of adverse possession limits the security of property rights by transferring formal land titles from absentee owners who leave their land idle to adverse possessors that use the land. This paper exploits plausibly exogenous variation in the security of land titles, as a result of historical changes of adverse possession legislation in U.S. states between 1840-1920, to investigate the causal effects of the security of land titles. I find that a reduction in the security of titles increased agricultural output. The main channel is incentivizing higher land utilization. A reduction in the security of land rights is also associated with an increase of investment in farms and improved access to capital markets, as well as with an increase in the share of owner-cultivated farms and the number of mid-sized farms. These findings suggest that the effect of property rights on economic development is not monotonic, and that property rights may be over secure.
This paper studies the impact of social learning on the formation of close-knit communities. It provides empirical support to the hypothesis, put forth by the historian Fred Shannon in 1945, that local soil heterogeneity limited the ability of American farmers to learn from the experience of their neighbors, and that this contributed to their ``traditional individualism.'' Consistent with this hypothesis, I establish that historically, U.S. counties with a higher degree of soil heterogeneity displayed weaker communal ties. I provide causal evidence on the formation of this pattern in a Difference-in-Differences framework, documenting a reduction in the strength of farmers' communal ties following migration to a soil-heterogeneous county. Using the same design, I also show that soil heterogeneity did not affect the social ties of non-farmers. The impact of soil heterogeneity is long-lasting, still affecting culture and political preference today. These findings suggest that, while understudied, social learning is an important determinant of culture.