Grubb JEH 3-2010 proof

Grubb JEH 3-2010 proof - Testing for the Economic Impact of...

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119 Testing for the Economic Impact of the U.S. Constitution: Purchasing Power Parity Across the Colonies versus Across the States, 1748–1811 F ARLEY G RUBB The U.S. Constitution removed real and monetary trade barriers between the states. By contrast, these states when they were British colonies exercised considerable real and monetary sovereignty over their borders. Purchasing power parity is used to measure how much economic integration between the states was gained in the decades after the Constitution’s adoption compared with what existed among the same locations during the late colonial period. Using this measure, the short-run effect of the Constitution on economic integration was minimal. This may have been because the Constitution did not eliminate all the institutional barriers to interstate trade before 1812. “No idea is more firmly planted in American history than the idea that one of the most difficult problems during the Confederation was that of barriers to trade between state and state. There had been such barriers in colonial times . . .” Merrill Jensen 1 “The ‘secret’ of American economic growth, English legal scholar Sir Henry Maine wrote in 1886, lay in ‘the [constitutional] prohibition against levying duties on commodities passing from State to State . . . . It secures to the producer the command of a free market over an enormous territory of vast natural wealth . . .’” Charles W. McCurdy 2 n 1787, three years after the Treaty of Paris ended the Revolution, the founding fathers crafted a new constitution. This U.S. Constitution, ratified by the states and then adopted by Congress in 1789, united the states into one country both politically and economically to a greater extent than what had existed under the preceding Articles of Confederation or under British rule prior to 1776. It required state governments to relinquish their sovereign power to place revenue- generating duties on commerce with other states and foreign nations, as The Journal of Economic History , Vol. 70, No. 1 (March 2010). © The Economic History Association. All rights reserved. ISSN 0022-0507. Farley Grubb is Professor, Economics Department, University of Delaware, Newark, DE 19716; and NBER Research Associate. E-mail: 1 Jensen, New Nation , p. 337 2 McCurdy, “American Law,” p. 631. I
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120 Grubb well as relinquish their sovereign power to emit fiat paper monies and determine what could be legal tender within their jurisdictions. The Constitution also required national tariffs on imports from outside the United States to be uniform across the states and prohibited export tariffs (Article 1, Sections 8, 9, and 10). In short, it swept away trade barriers, both real and monetary, between the states and did so with constitutional force and certainty. It made the United States a common market.
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This note was uploaded on 02/18/2010 for the course ECON 316 taught by Professor Grubb during the Fall '09 term at University of Delaware.

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Grubb JEH 3-2010 proof - Testing for the Economic Impact of...

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