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Closing Time: The Local Equilibrium Effects of Prohibition
Published online by Cambridge University Press: 03 September 2021
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.
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- © The Economic History Association 2021
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.
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