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Notes
Roger Ransom and Richard Sutch,One Kind of Freedom (New York: Cambridge, 1977), chapters 1-3 and Appendix C. Also see Ransom and Sutch, “The Impact of the Civil War and of Emancipation on Southern Agriculture,”Explorations in Economic History 12 (January 1975), pp. 1-28.
Peter Temin, “The Post Bellum Recovery of the South and the Cost of the Civil War,”Journal of Economic History 36 (December 1976), pp. 898–907.
A decline in the supply of labor will raise labor’s share of income if the elasticity of substitution is less than unity. It will raise labor’s absolute income if the elasticity of substitution is less than the relative share of the other factor, in the two-factor case. See P. R. G. Layard and A. A. Walters,Microeconomic Theory (New York: McGraw Hill, 1978), pp. 270–271.
Separate production functions for southern agriculture have been estimated by Robert Fogel and Stanley Engerman,Time on the Cross (Boston: Little-Brown, 1974), Vol. 2, pp. 135–143, and by Stephen Decanio, “Productivity and Income Distribution in the Post Bellum South, ”Journal of Economic History (June 1974), pp. 422-446. However, the differences in the functions fitted makes comparison on their results difficult. Moreover, Fogel and Engerman compute labor’s share to be 58% before the war, while Decanio finds it to be about 30% during the years 1880–1910. This indicates that labor’s share fell by nearly 50%, which would be an unheard of change and is thoroughly implausible in the bargain. Such a decline implies a very high elasticity of substitution, which is at variance with both the assumptions and evidence in Ransom and Sutch, “The Impact of the Civil War.”
Figures on labor’s competitive share are from Ransom and Sutch,One Kind of Freedom, Appendix A. That Blacks’ incomes fell by 12% can be shown as follows: if income is $100 and labor’s share is 50%, then labor receives $50. A 22% decline reduces income to $78. If labor now receives 56% of income, this amounts to $44, which is 12% less than previously.
Ransom and Sutch, “The Impact of the Civil War,” p. 16. They assume a zero elasticity of substitution.
These data for 1870 are taken from the ninth census, which, as is well-known, contains serious under-numerations, especially for the South. However, if 1870 cotton production was under-counted, then our data, which are designed to show that the decline in output and income was too little to account for the collapse in land values, may overstate that decline, if anything.
For a justification of this procedure, see Temin, “Post Bellum Recovery,” p. 901.
This is true only if the increase in labor's share came entirely at the expense of land.
An example may be helpful. Let gross agricultural income be $100 in 1860. The competitive shares of labor and nonlabor inputs are 50% ($50) each. However, due to slave exploitation, nonlabor inputs actually get 80% ($80) and the slaves receive only 20% ($20). In 1870, income has fallen by 26% to $74, and, with the end of slave exploitation, this is now shared 50-50. Nonlabor income then becomes $37, which is 53% less than it was in 1860.
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Aldrich, M. Post-bellum southern income: A response to ransom and sutch. Rev Black Polit Econ 9, 435–440 (1979). https://doi.org/10.1007/BF02891732
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DOI: https://doi.org/10.1007/BF02891732