There’s No Such Thing As Free Land: the Homestead Act and the Economic Development
Abstract: During the 19th century the U.S. government privatized nearly a billion acres of land. Initially, settlers and investors could purchase unrestricted amounts of land. Following the 1862 Homestead Act, settlers could also claim up to 160 acres of federal land for free after five years of residency and cultivation. Despite its historical importance and vast scale, evidence of the causal effect of the act on economic development is limited. This study utilizes two empirical strategies to examine the long-run impacts of the act. First, we exploit plausibly exogenous variation along the 1862 frontier resulting from the time of enactment and the patterns of prior land privatizations. Second, we utilize regression discontinuity at the boundaries of former Native Americans tribal land, on which subsequent homesteading was prohibited. Results from both designs indicate that the Homestead Act had a negative effect on development. Areas more exposed to homesteading have lower property values, lower income, and lower levels of education attainment in today. Using census data from the period of initial settlement, we find no evidence of selective sorting on observable demographics. To further explore channels, we study the dynamics of development, the patterns of land ownership, and the geographic and economic mobility of homesteaders relative to land purchasers.
