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The Intergenerational Effects of a Large Wealth Shock: White Southerners after the Civil War

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Abstract

The nullification of slave wealth after the US Civil War (1861–1865) was one of the largest episodes of wealth compression in history. We document that White Southern households that owned more slaves in 1860 lost substantially more wealth by 1870, relative to Southern households that had been equally wealthy before the war. Yet, their sons almost entirely recovered from this wealth shock by 1900, and their grandsons completely converged by 1940. Marriage networks and connections to other elite families may have aided in recovery, whereas transmission of entrepreneurship and skills appear less central. (JEL D31, G51, J15, J24, N31, N32)

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... high wealth persistence in the South after the war (Wiener 1976(Wiener , 1978McKenzie 1993;Dupont and Rosenbloom 2018;Ager, Boustan, and Eriksson 2021). However, relatively little work has documented the persistence of former slave owners in politics, even though the political choices of the Postbellum South clearly reflected their preferences. ...
... They find that the rate of persistence of wealthy Southerners was lower than that of their Northern counterparts, but there was still substantial persistence in the South after the Civil War. Ager, Boustan, and Eriksson (2021) specifically focus on slave owners and find that the abolition of slavery was a significant negative wealth shock for them, but that their sons and grandsons were able to fully recover these losses. None of these studies looks at the persistence of political power. ...
... Acemoglu and Robinson (2008b) argue that even though slave owners might have lost their slave wealth, they continued to control the land, which in turn kept the basic plantation-based agricultural system intact. Relatedly, Ager, Boustan, and Eriksson (2021) show that while the abolition of slavery led to substantial wealth losses for slave owners, this loss Notes: Robust standard errors, clustered at 100x100 km grid cells, in parentheses. The outcomes code the share of all legislators elected after 1871. ...
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... They find that the rate of persistence of wealthy Southerners was lower than that of their Northern counterparts, but there was still substantial persistence in the South after the Civil War. Ager, Boustan, and Eriksson (2021) specifically focus on slave owners and find that the abolition of slavery was a significant negative wealth shock for them, but that their sons and grandsons were able to fully recover these losses. None of these studies looks at the persistence of political power. ...
... Acemoglu and Robinson (2008b) argue that even though slave owners might have lost their slave wealth, they continued to control the land, which in turn kept the basic plantation-based agricultural system intact. Relatedly, Ager, Boustan, and Eriksson (2021) show that while the abolition of slavery led to substantial wealth losses for slave owners, this loss Notes: Robust standard errors, clustered at 100x100 km grid cells, in parentheses. The outcomes code the share of all legislators elected after 1871. ...
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... Because slaves were the most crucial form of agricultural assets, 19 the destructive effects of the Civil War were larger to slaveowners. Ager et al. (2019) find that white households having more slave assets lost substantially larger after the Civil War than those with otherwise similar pre-War wealth levels. The greater loss of the means of production would have increased the need to isolate the black labor force. ...
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Ideally, scientific theory and scientific measurement should develop in tandem, but in recent years this has not been the case in economics. There used to be a time when leading economists, or their students, established or led statistical offices and took care that the measurements were consistent with the theory (and vice versa). Not anymore. Macroeconomic theorists and macroeconomic statisticians do not even speak the same language any longer. They do use the same words, such as ‘consumption’,‘investments’ or ‘unemployment’but the meanings can often be different. This book maps the differences between macroeconomic theory and measurement and explores them in some detail while also tracking their intellectual, historical and, in some cases, ideological origins. It also explores the possible policy implications. In doing so, the book draws on two separate strands of literature which are seldom used in unison: macro-statistical manuals and theoretical macro-papers. By doing so, the book contributes to the effort to bridge the gap between them without compromising on the idea that a meaningful science of economics should, in the end, be based upon individual people and households and their social and cultural embedding instead of a ‘representative consumer’, or Robinson Crusoe figure.
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