The development of the American economy program.

AuthorBoustan, Leah
PositionProgram Report

The mission of the Development of the American Economy Program is to research historical aspects of the American economy broadly defined. Its members are economic historians whose specific interests span many sub-fields within economics. Economic history is a distinct field, like macro, public finance, and labor, with a group of practitioners who self-identify as economic historians. Economic historians study parts of the past that are relevant to the issues of our day.

Recent work by Ran Abramitzky has demonstrated that economic historians have increasingly become more integrated into mainstream economics. (1) During the past 20 years, an increasing fraction of articles in top economics journals have been in the field of economic history and have been written by economic historians. Historical data and episodes are used, Abramitzky notes, to test theory, to improve policy, to identify channels of causation, and to understand big questions through the natural experiments history offers. The methods used by those who self-identify as economic historians are increasingly like those of other economists, and new Ph.Ds in economic history have prospects similar to those in other fields. Furthermore, economists of all stripes are doing more economic history. Still, there are differences that make the field and its practitioners distinct.

In recent years, the topics of health and mortality, intergenerational mobility, the environment, education, banks, financial crises, the Great Depression, migration and immigration, and corporate governance have led the research interests of associates of the DAE Program. Big data and record linkage are among the new methodological areas of interest. This report highlights research in three areas: health and economic growth, immigration and migration, and the Great Depression and the New Deal.

Health and Economic Growth

Health is among the most important aspects of well-being that is not included in standard measures of national income. Studying health changes over the long run reveals both positive and negative dimensions of economic growth. Historically, greater income per capita has improved health through better nutrition. (2) Income growth during the last century has enabled the innovation and diffusion of effective medicines and medical treatments. But economic growth has also fouled air and water, producing setbacks and occasional reversals in measures of health.

Health has been an important research topic for DAE members since the beginning of the program. In the past several years, they have made progress in understanding the magnitude of the negative side of economic growth and also have sought to learn when the detrimental consequences of economic growth were abated, whether through advances in science or intervention of enlightened professionals and dedicated public officials. This research is highly relevant for a number of current issues in both developing and developed nations.

Infant mortality was high in general in the past, and higher still in urban and industrial areas. Even in rich countries, historical infant mortality rates were higher than rates in the poorest nations today. (3) But infant mortality began to decline around the turn of the 20th century. How this happened is explored by Marcella Alsan and Claudia Goldin in a study of Massachusetts, the first state to collect vital statistics and one of the earliest to commit vast resources to secure pure water for its citizens, pass laws to protect its watersheds, and build a mammoth sewerage system to service the area around its largest city, Boston. (4) Using sharp changes in the years that the water and sewerage projects were completed across 54 cities and towns, Alsan and Goldin estimate that the two projects accounted for 37 percent of the total decline in infant mortality among fully treated municipalities during the 1880-1915 period.

Not every state had statistics as reliable as those from Massachusetts. Because mortality rates are computed from two separate series--births and deaths--and because not all states were reporting complete data until 1933, serious data issues can arise. In fact, as shown by Katherine Eriksson, Gregory T. Niemesh, and Melissa Thomasson, because deaths were better reported than births, infant mortality rates have been overstated for much of the 1915-40 period, particularly in southern states and for African Americans. (5) In consequence, the long-run decline in infant mortality for certain groups has been overstated.

Industrialization was one of the great engines of economic growth, but it reduced life expectancy in the factory towns of 19th century England. Walker Hanlon has cleverly figured out how to identify the impact of industrial growth on mortality and has shown that industrial pollution was a major cause of mortality in that era, particularly in urban areas. (6) Hanlon investigates the impact of "dirty" coal on British city growth and separates the positive impact of industrial growth from the negative pollution externalities. (7) Cleaner ways to power industry with coal existed but were not adopted due to low coal prices, a lack of regulations, and the external costs that firms imposed on others. Hanlon shows that had Britain adopted more efficient coal use, it would have been substantially more urbanized by the early 20th century.

Babies were the proverbial "canaries in the coal mine" and died at higher rates as coal-fired electricity generation plants spread in the United States. Exploiting the expansion of the electric grid, Karen Clay, Josh Lewis, and Edson Severnini show the impact of coal pollution on infant deaths from 1938 to 1962, a period of rapid electricity expansion and unregulated emissions. (8) In a related paper, they find that the deadly influenza pandemic of 1918-19 was considerably worse in areas heavily polluted by coal smoke from electric generating plants. (9) Bituminous coal use for home heating varied across states, years, and months for various reasons. Using that variation, Alan Barreca, Clay, and Joel Tarr show the extent to which the reduction in soft coal use...

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