Lecture03_fall2009 - Ec183, Fall 2009 Leah Boustan Agenda...

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1 Ec183, Fall 2009 Leah Boustan Agenda for today • Review data table from Sokoloff and Engerman: Reversals of fortune in the Western hemisphere • Return to hypotheses about natural resource abundance in US: Favorite of fortune or design? • First lecture on factor accumulation (labor): High fertility in the US in the early 19 th century Sokoloff and Engerman (2000) emphasize factor endowments Colonies were endowed with different soil quality Type 1: Land suitable for sugar and coffee (Cuba) Economies of scale b plantation agriculture and slave labor b small elite; wide inequality b guarded franchise b high/arbitrary tax rates and limited education Type 2: Land suitable for wheat (US) Small scale farming b relatively equal distribution of wealth b open franchise b broad public education
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2 Does the evidence support the factor endowments story? Wealth requirement to vote Literacy requirement to vote % voting 1840-80 Canada Y N 10% United States N N 15% Rest of Americas 7/7 7/7 1% 1920-40 Canada N N 41% United States N Y** 38% Rest of Americas 3/11 6/11 15% Source: Sokoloff and Engerman (2000) ** Literacy requirements in southern (cotton-growing) areas only Why did the US have such a large mineral store? • Hypothesis 1: The US was a favorite of fortune . The US was lucky to find abundant natural resources that contributed to economic growth. • Hypothesis 2: The US was a favorite by design . The country’s natural resource abundance was due to a unique set of institutions designed to encourage exploration and extraction.
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3 FACTS In the year 1913, US extracted 65% of world oil From 1913-89, US extracted 20% of world oil (= X) In 1989, US contained 5% of world oil reserves (= Y) QUESTION What share (= a ) of oil reserves were located in the US in 1913 (= Z)? KEY LOGICAL STEP 1913 reserves (X + Y) were EITHER extracted between 1913-89 or remained under ground in 1989. Let US extract b percent of own reserves from 1913-89 b Z = 0.2X AND (1-b) Z = 0.05Y Add the two statements b Z = 0.2X + 0.05Y Note that Z can also be expressed Z = a (X + Y) So, Z = 0.2X + 0.05Y = aX + aY If X = 0, a = 0.05. If Y = 0, a = 0.2. Therefore, 0.05
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This note was uploaded on 10/28/2009 for the course ECONOMY 351 taught by Professor Korn during the Spring '09 term at Abraham Baldwin Agricultural College.

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Lecture03_fall2009 - Ec183, Fall 2009 Leah Boustan Agenda...

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