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Testing for the Economic Impact of the U.S. Constitution: Purchasing Power Parity across the Colonies versus across the States, 1748-1811

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Listed author(s):
  • Farley Grubb

Abstract

The U.S. Constitution removed real and monetary trade barriers between the states. By contrast, these states when they were British colonies exercised considerable real and monetary autonomy over their borders. Purchasing power parity is used to measure how much economic integration between the states was gained in the decades after the Constitution's adoption compared with what existed among the same locations during the late colonial period. The U.S. Constitution's net contribution to the economic integration of the nation is found, using this method, to be not as large as is commonly supposed.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13836.

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Date of creation: Mar 2008
Publication status: published as Grubb, Farley, 2010. "Testing for the Economic Impact of the U.S. Constitution: Purchasing Power Parity Across the Colonies versus Across the States, 1748?1811," The Journal of Economic History, Cambridge University Press, vol. 70(01), pages 118-145, March.
Handle: RePEc:nbr:nberwo:13836
Note: DAE
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Find related papers by JEL classification:
  • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
  • F15 - International Economics - - Trade - - - Economic Integration
  • F54 - International Economics - - International Relations, National Security, and International Political Economy - - - Colonialism; Imperialism; Postcolonialism
  • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
  • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
  • N41 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: Pre-1913
  • N71 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: Pre-1913
  • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
  • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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  1. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  2. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
  3. Taylor, Alan M, 2001. "Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price," Econometrica, Econometric Society, vol. 69(2), pages 473-498, March.
  4. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
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  6. Michael D. Bordo & Eugene N. White, 1990. "British and French Finance During the Napoleonic Wars," NBER Working Papers 3517, National Bureau of Economic Research, Inc.
  7. Heckelman, Jac C. & Dougherty, Keith L., 2007. "An Economic Interpretation of the Constitutional Convention of 1787 Revisited," The Journal of Economic History, Cambridge University Press, vol. 67(04), pages 829-848, December.
  8. Farley Grubb, 2003. "Creating the U.S. Dollar Currency Union, 1748–1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain?," American Economic Review, American Economic Association, vol. 93(5), pages 1778-1798, December.
  9. Alan M. Taylor & Mark P. Taylor, 2004. "The Purchasing Power Parity Debate," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 135-158, Fall.
  10. David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1211-1236.
  11. Froot, Kenneth A. & Rogoff, Kenneth, 1995. "Perspectives on PPP and long-run real exchange rates," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 32, pages 1647-1688 Elsevier.
  12. Bordo, Michael D. & Marcotte, Ivan A., 1987. "Purchasing power parity in colonial America: Some evidence for South Carolina 1732-1774 a comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 311-323, January.
  13. Shambaugh, Jay C., 2006. "An experiment with multiple currencies: the American monetary system from 1838-60," Explorations in Economic History, Elsevier, vol. 43(4), pages 609-645, October.
  14. McGuire, Robert A., 2003. "To Form a More Perfect Union: A New Economic Interpretation of United States Constitution," OUP Catalogue, Oxford University Press, number 9780195139709.
  15. Kausik Chaudhuri & Jeffrey Sheen, 2004. "Purchasing Power Parity Across States and Goods Within Australia," The Economic Record, The Economic Society of Australia, vol. 80(250), pages 314-329, 09.
  16. Thomas, Robert Paul, 1965. "A Quantitative Approach to the Study of the Effects of British Imperial Policy upon Colonial Welfare: Some Preliminary Findings," The Journal of Economic History, Cambridge University Press, vol. 25(04), pages 615-638, December.
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Cited by:

  1. Farley Grubb, 2012. "Is Paper Money just Paper Money/ Experimentation and Local Variation in the Fiat Paper Monies Issued by the Colonial Government of British North America, 1690-1775: Part I," Working Papers 12-07, University of Delaware, Department of Economics.
  2. Cory Cutsail & Farley Grubb, 2017. "The Paper Money of Colonial North Carolina, 1712-1774," NBER Working Papers 23783, National Bureau of Economic Research, Inc.
  3. Farley Grubb, 2012. "Is Paper Money Just Paper Money? Experimentation and Variation in the Paper Monies Issued by the American Colonies from 1690 to 1775," NBER Working Papers 17997, National Bureau of Economic Research, Inc.

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