One Giant Leap: Emancipation and Aggregate Economic Gains

We characterize American slavery as inefficient, whereby emancipation generated substantial aggregate economic gains. Coercion distorted labor markets, raising the marginal cost of labor substantially above its marginal benefit. Production came at immense costs imposed on enslaved people that reduced aggregate economic surplus (the total value of output minus total costs incurred). Costs of enslavement are inherently difficult to quantify, which leads to a wide range of quantitative estimates from this conceptual shift, but we calculate that emancipation generated aggregate economic gains worth a 4%–35% increase in U.S. aggregate productivity (or worth 7–60 years of technological innovation). Emancipation decreased output but decreased costs substantially more, illustrating the substantial potential for aggregate economic gains in the presence of severe sectoral misallocation.