Thursday, 16 April 2015

Is history is more or less bunk? 2

Further to my previous post I have now found a copy of the paper The Economist was talking about, “Lynchings, Labour and Cotton in the US South” (pdf) by Cornelius Christian.

In the paper Christian notes that in the short term the advantage of lynchings to whites was via the labour market. The evidence presented by Christian demonstrates that lynchings prevented black workers from fully participating in the labour market to the advantage of white workers. Lynchings cause blacks to migrate away, not too surprising, lowering labour supply and increasing wages for white labourers.
Using the fact that world cotton prices are exogenous from a single county’s perspective, I find that cotton price shocks strongly predict lynchings. More precisely, one standard deviation decrease in the world cotton price results in a 0.095 to 0.16 standard deviation increase in lynchings within a cotton-producing county. The findings are robust to the inclusion of controls, and to the use of tests with white-on-white lynchings and California lynchings. Cotton price shocks also do not predict legal executions of blacks, suggesting motives for lynching were different. These ffects are more pronounced in counties that had railroads in 1890, suggesting that links to world markets and greater local labour demand had an impact on lynchings. Disenfranchisement attempts such as the poll tax and literacy tests do not strengthen this effect, suggesting the substitutability of informal violence with formal institutions as a way to control workers. All this is indicative that greater numbers of lynchings served, at least in part, as a way of controlling black workers.

Using these observations as a guide, I claim that lynchings had labour market effects that benefitted white workers. During years of low cotton prices, wages are low. When whites lynch blacks, this causes other blacks to migrate out of a county, thus reducing labour supply and increasing wages. I show in my data that lynchings predict greater black out-migration, and higher state-level agricultural wages. A one standard deviation increase in lynchings within a county leads to 6.5 to 8 % more black out-migration, and a 1.2 % increase in state-level wages.
Given these short-run effects what are the long-run outcomes?
I then turn to the long-term effects of lynchings, starting with the Civil Rights era. Although lynchings became very rare in the 1930s, discrimination against blacks continued. I focus on the 1964 Mississippi Summer project, a campaign to register African Americans to vote - the campaign’s organisers encountered violence and discrimination throughout the summer. I show that Mississippi counties with more 1964 violence also had more lynchings in the past. Using datafrom the 2008-2012 American Community Survey, I also show that lynchings in the past predict white-black wage and income gaps today. This is robust to the inclusion of various controls and state fixed effects. Furthermore, I test the sensitivity of the coefficient estimates to control variables using Altonji, Elder, and Taber (2005) statistics. My results are shown to be robust to these tests, strongly suggesting that labour market discrimination has persisted from lynchings to the present day.
The modern-day and Mississippi Summer results suggest that the effects of lynchings persist up until the present day. This is consistent with a mechanism in which discrimination continues to affect African Americans. Such prejudice starts with lynchings of African Americans, and subsequently manifests in violence when Civil Rights community organisers went to Mississippi in 1964. It continues to affect contemporary black incomes, relative to their white neighbours.
If labour market discrimination today, driven by prejudice from the past,  is the cause of the income gap between blacks and whites then there are a couple of questions to ask. First is there some social mechanism at work to perpetuate the discrimination? and second what is preventing Becker type effects from reducing the gap? Gary Becker pointed out many years ago a competitive labour market provides strong incentives to keep our prejudices out of our business decisions. The force of competition will make even the most racist/sexist/homophobic/ employer see that by hiring only heterosexual men of Anglo-Saxon descent, they limit the talent pool accessible to them, which is not good business. What market imperfections are preventing such competitive forces working in the South?

An interesting paper which shows history is not bunk and has relevance even today.

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