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The Impact of Innovation, Regulation, and Market Power on Economic Development: Evidence from the American West

Authors
  • Huang, Jingyi
Publication Date
Jan 01, 2021
Source
eScholarship - University of California
Keywords
Language
English
License
Unknown
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Abstract

This dissertation analyzes how technological and institutional changes influence economic development. Chapter 1 quantifies the long-term effect of refrigeration on agricultural production. Mechanical refrigeration greatly reduced transportation cost for perishable products but not non-perishable products. I leverage this differential effect to identify the effect of technological change on production with an event-study design. Results show that a one percentile increase in relative suitability of fodder versus wheat production leads to more land area being developed as farmland, higher values of total farm output, as well as higher land values. The effects were driven primarily by the top two quartiles of counties in terms of fodder versus wheat suitability, and most effects persisted until 1960. Chapter 2 focuses on how the innovation influenced market power in the meatpacking industry. Refrigeration created a highly concentrated meatpacking industry due to the capital-intensive production process. Documents show that the five dominant firms formed a cartel to openly collude and manipulate the market by exploiting the time gap between sellers' shipment decisions and final sales. I leverage an exogenous regulatory change and novel high-frequency data to quantify the welfare effects of the manipulation. Compared to the standard monopsony model, I find that cartel manipulation harmed cattle sellers attracting more cattle to the market and purchases them at a lower average price. The manipulation strategy also harmed downstream consumers by increasing beef prices and thus total household food expenditures.Chapter 3 uses the historical evolution of fence laws to examine the impact of liability rules on economic development. Fence laws assigned the liability for livestock trespassing to either farmers or ranchers. I use newly compiled data on the evolution of county-level fence laws to analyze the causal relationship between liability rules and land allocation, production decisions, and agricultural productivity. Results show that, by making livestock owners liable for trespassing, the fence-in rule increased farmland development, corn cultivation acreage and yield, and the total value of farm output. I conclude that, with substantial transaction costs, legal institutions that govern liability rules and property rights can have large and persistent effects on economic development.

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