Closing Time: The Local Equilibrium Effects of Prohibition

Greg Howard and Arianna Ornaghi

The Journal of Economic History, 2021, vol. 81, issue 3, 792-830

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.

Date: 2021
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