Land Concentration and Long-Run Development: Evidence from the Frontier United States
Worldwide, land ownership is concentrated in the hands of relatively few people. This paper studies the impacts of land concentration on the long-run development of communities founded in the frontier United States using quasi-random variation in land allocation policies. I collect a large database of modern property tax valuations and show that land concentration had persistent effects over a span of 150 years, lowering investment by 23%, overall property value by 4.4%, and population by 8%. I argue that landlords’ use of sharecropping raised the costs of investment, a static inefficiency that persisted due to transaction costs in land markets. I find little evidence for other explanations, including elite capture of political systems. I use my empirical estimates to evaluate counterfactual policies, applying recent advances in combinatorial optimization to show that an optimal property rights allocation would have increased my sample’s agricultural land values by $28 billion (4.8%) in 2017.