Institutions and Southern development: Lynching as a signal of insecure property rights

Why was the South poor from the end of Reconstruction through World War II? How does institutional uncertainty affect economic growth? Using qualitative and quantitative evidence on lynching, this dissertation argues that Southern economic development was restricted by the fact that the transition from unjust (but stable) institutions under slavery to nominally just (but unstable) institutions under freedom produced uncertainties that reduced investment and curtailed the evolution of well-developed markets. The South's failure to protect private property rights appears to have manifested itself in relatively low productivity at the turn of the twentieth century as well as lower productivity growth between 1900 and 1940.; Building on recent contributions to the New Institutional Economics, this dissertation suggests that institutional uncertainty is an important source of transaction costs that reduce development over time. Institutional uncertainty in the South was manifested in the gruesome lynchings that plagued the South in the late nineteenth and early twentieth centuries. As North (2005) argues, perceptions of reality (and beliefs about reality) ultimately determine the institutions, organizations, and outcomes that emerge. What is more, transaction costs prevent potentially beneficial trades from being made. Institutions themselves may be a source of transaction costs and bad incentives; moreover, uncertainty within the structure of institutions---not knowing what the incentives actually are---may be an equally important aspect of under-development over time. Examples from the post-Reconstruction "lynching era" suggest that weak social capital and uncertain institutions reduced the vitality of Southern markets and laid the foundation for decades of Southern poverty.; This dissertation presents evidence that racist violence was in part to blame for the fact that "progress was nowhere in evidence" in the South at the turn of the twentieth century as well as the fact that the South failed to converge to national average incomes during the early twentieth century. Findings suggest that improving the quality of Southern institutions and social capital (as reflected in decreases in lynching) would have produced substantial increases in labor productivity...