Two Different Types of Settlers: Effects of Selection into Purchase and Homesteading

Katherine Hauck, University of Arizona

This paper explores the extent to which and the mechanisms driving how the Homestead Act changed agricultural productivity and settler types. I examine the causal effect of settler selection on farm productivity at the individual level in the 1860’s, 1870’s, and 1880’s in Kansas. An important challenge for identifying the causal effect of purchasing versus homesteading land is that there may be selection into each group, but this selection has been largely ignored by previous literature. I present a simple model of selective purchasing and use it to develop an instrument (distance to the nearest land office) for identifying the causal effect of the method acquisition on subsequent farm productivity at the individual level. I then demonstrate evidence of selection into purchase and homesteading and its impacts on previous literature. Using the distance to the land office instrument, I show that homesteaders and purchasers differed in terms of farming strategies: purchasers invested in durable goods like buildings and fences, while homesteaders invested in growing consumable farm products like crops and livestock. Finally, to determine the causal mechanism behind this difference in farming strategies between purchasers and homesteaders, I develop a model of heterogeneous production functions. This model shows why some settlers invested in fences and why others initially invested in crops, and how exogenous heterogeneity in production functions led to selection into purchase or homesteading because of the different legal administrative requirements of each method of historical land acquisition. The unique farm-level data provided by the 1880 Kansas Agricultural Census allows me to estimate each settler’s production function using a standard Cobb-Douglas method. I then use an IV of farmers’ second pieces of land acquired to empirically show there exists exogenous heterogeneity in production functions between purchasers and homesteaders, which leads to the different farming strategies and farm productivity observed.

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 Presented in Session 89. Land and Labor in the Age of Mass Migration