Three essays on relative price convergence, acreage decisions and standard of living: The postbellum period

The purpose of this research is to understand the dynamics of the changes in market patterns in the United States during the postbellum period. This study specifically focuses on the effect of the reduced transaction costs on price and production behavior in the second half of the nineteenth century, where declines in transaction costs were mainly caused by railroad development during this period. Assuming no restrictions on commodity arbitrage, prices in two markets should not differ more than the cost of transportation between these markets. Therefore, we examined the effects of decreased transportation costs, as a result of the development of railroads, on the convergence of wheat and corn prices using a panel of 48 U.S. states from 1866 to 1906.; Due to the low power of unit root and cointegration tests in such small samples, we employed a panel test introduced by Levin and Lin (1992). This test has many advantages over conventional tests. First, it makes use of the variation across the individuals to improve estimation efficiency. Second, and more importantly, it increases the available data points for the test and, therefore, substantially increases the power of the tests. The results showed that, by decreasing transportation costs, railroads played an important role in price convergence among states of the United States for wheat and corn during the postbellum period.; This study also analyzed the effect of farmers' price responsiveness and railroad development on acreage decisions. A potential simultaneity between these determinants was mentioned in some earlier studies, but never examined. This study sheds some light on these relationships by employing a simultaneous equations model. The results showed that acreage, prices and railroad mileage are jointly determined. Furthermore, farmers were very responsive to wheat prices in their wheat acreage decisions in the eastern and northeastern regions when endogeneity effect is considered. In the western and southern regions, however, farmers were not responsive to wheat prices in their wheat acreage decisions. On the other hand, they were very responsive to corn and animal prices in their corn acreage decisions. Railroads were one important determinant of farmers' acreage decisions positively in every region.; After estimating the effects of railroads on the relative price convergence and production decisions, this study utilized a different approach to examine the effect of transportation on the average height of people in the postbellum period, simply by modeling the change in the marketable surplus of protein. In particular, the study focuses on the effect of railroad development on American average height in this period. The results show that railroad development increased average height from 1866 to 1887, and after this period, its effect was very small.