Development of the American Economy.

NBER's Program on the Development of the American Economy, directed by Claudia Goldin of Harvard University, met in Cambridge on March 2. The following papers were discussed:

Daniel Bogart, University of California, Irvine, and Gary Richardson, University of California, Irvine and NBER, "Institutional Adaptability and Economic Development: The Property Rights Revolution in Britain, 1700 to 1830" (NBER Working Paper No. 13757)

Charles Calomiris, Columbia University and NBER, and Jonathan Pritchett, Tulane University, "Preserving Slave Families for Profit: Traders Incentives and Pricing in the New Orleans Slave Market"

Joseph H. Davis, Vanguard Group and NBER; Christopher Hanes, SUNY Binghamton; and Paul W. Rhode, University of Arizona and NBER, "Harvests and Business Cycles in Nineteenth Century America"

Leah P. Boustan, University of California, Los Angeles and NBER, and Robert A. Margo, Boston University and NBER, "Spatial Mismatch and the Formation of Bad Ghettos: New Evidence from the U.S. Postal Service"

Claudia Goldin and Lawrence F. Katz, Harvard University and NBER, "Transitions: Career and Family Lifecycles of the Educational Elite"

Daniel Raff, University of Pennsylvania and NBER, "The Book-of-the-Month Club: A Reconsideration"

Adaptable property-rights institutions, Bogart and Richardson argue, foster economic development. The British example illustrates this point. Around 1700, Parliament established a forum where rights to land and resources could be reorganized. This venue enabled landholders and communities to take advantage of economic opportunities that could not be accommodated by the inflexible rights regime inherited from the past. In this essay, historical evidence, archival data, and statistical analysis demonstrate that Parliament increased the number of acts reorganizing property rights in response to increases in the public's demand for such acts. This evidence corroborates a cornerstone of the authors' hypothesis.

Calomiris and Pritchett investigate the determinants of slave family discounts, using data from the New Orleans slave market. Large discounts occur in family transactions with and without children. Scale effects do not explain family discounts. Selectivity bias is likely, because in the absence of a scale discount, and in the absence of selectivity bias, family discounts would have created huge unrealized profit opportunities for slave traders from breaking up families that were sold together. Data from the manifests of ships carrying slaves to be sold in New Orleans provide direct evidence for the importance of selectivity bias in explaining slave family discounts. Children likely to have been shipped with their mothers are 1-2 inches shorter than children of the same sex and age who are unaffiliated, depending on age. Family discounts reflect the fact that the market selectively attached value to keeping some families together to take advantage of family members' willingness to provide care to other family members.

Davis and his co-authors observe that most major American industrial business cycles in the era from the late 1870s to WWI were caused by fluctuations in the size of the cotton harvest attributable to economically exogenous factors such as weather. The wheat and corn harvests did not affect industrial production; nor did the cotton harvest before the late 1870s. The unique effect of the cotton harvest on nonagricultural activity in this period can be explained by a standard open-economy Keynesian model of the U.S. economy under the gold standard.

Today, residential segregation is associated with poor economic outcomes for African-Americans but, in the mid-twentieth century, the opposite was true. What changed? One explanation emphasizes the relative loss of jobs in the central city. Boustan and Margo focus on black employment at the U.S. Postal Service, which has remained centralized for largely exogenous reasons. If job access matters, they should see African-Americans substituting toward postal employment over time, particularly in cities whose black neighborhoods are clustered downtown. From 1960 onward, blacks in segregated cities have been more likely than whites to work for the postal service. This relationship did not exist in 1940 or 1950, when private sector jobs near black enclaves were plentiful. Furthermore, this pattern does not hold for mail carriers whose work is distributed throughout the metropolitan area. As blacks gained access to the suburbs, the magnitude of this relationship has declined. Black occupational choices suggest that spatial mismatch was potent in the 1950s and 1960s, when firms began to suburbanize but black households were unable to follow, but is less important today.

Large changes in family and career transitions among college graduates since the early 1970s have led to marked increases in the ages at marriage and birth, enormous increases in the fraction women among professionals, and a large decrease in the gender earnings gap. Goldin and Katz ask whether these general trends can be observed, as well, among those graduating from one of the most elite institutions of higher education. They use data from the recently compiled Harvard and Beyond (H&B) dataset, which concerns three cohorts with the approximate graduation dates of 1970, 1980, and 1990. They find that even as early as 1970 Harvard/ Radcliffe women were pursuing professional careers to about the same degree as in recent cohorts. Although they married considerably earlier than those in recent classes, they had their children just as late and fewer of them. The amount of time off from career among women is about the same in all cohorts. Certain professions appear to be more amenable to combining family and career. The gender gap in earnings in the entire H&B sample is enormously large mainly because the men in these cohorts earn enormously large incomes, especially in finance.

The Book-of-the-Month Club--much written about by English and Cultural Studies professors--was probably once the largest single firm in American book retailing. But its economic logic and significance are grossly understudied. Using oral histories taken from senior officials of the firm about 20 years after it started (among them all of the original employees), quantitative evidence given in an unusually detailed S-1 registration statement from its 1947 IPO, and manuscripts of research by the Gallup Organization, Raft studies the Club. In an industry famous for low margins all along the value chain, the firm's profitability in its initial 20 years was startlingly high, he shows. He argues that this relative superiority in performance derives from the exploitation of a vertical architecture quite unusual in the industry, and he documents how the exploitation worked. He also explores present-day counterparts.