Good Fences Make Good Neighbors: Evidence on the Effects of Property Rights

This paper uses the introduction of barbed wire fences to the American Midwest in the late 19th century to estimate the effects of property rights on farmers’ production decisions. Farmers were both formally and informally required to build fences to secure exclusive land-use rights, yet preferred wooden fences had been prohibitively expensive in areas with little woodland. The introduction and universal adoption of barbed wire fences encouraged property rights protection most in counties with the least woodland. Over that time, low-woodland counties are estimated to have undergone substantial relative increases in land settlement, land improvement, the improvement-intensity of farmland, land values, and the productivity and production share of crops most in need of protection. Some States’ previous efforts to reduce the need for fencing are not found to have been similarly effective, however, suggesting a difficulty in protecting property rights through legislation alone. JEL: D23, N51, O12, Q15 ∗I especially thank Michael Greenstone, as well as Daron Acemoglu, Josh Angrist, David Autor, Abhijit Banerjee, Dora Costa, Esther Duflo, Claudia Goldin, Tal Gross, Raymond Guiteras, Jeanne Lafortune, Philip Oreopoulos, and Peter Temin, for their comments. I also thank Daniel Sheehan for assistance with GIS software and the World Economy Lab for financial support. [email protected]