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Closing Time: The Local Equilibrium Effects of Prohibition

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  • Howard, Greg
  • Ornaghi, Arianna

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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  • Howard, Greg & Ornaghi, Arianna, 2021. "Closing Time: The Local Equilibrium Effects of Prohibition," The Journal of Economic History, Cambridge University Press, vol. 81(3), pages 792-830, September.
    • Handle: RePEc:cup:jechis:v:81:y:2021:i:3:p:792-830_5
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    JEL classification:

    • N91 - Economic History - - Regional and Urban History - - - U.S.; Canada: Pre-1913
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • E - Macroeconomics and Monetary Economics

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