Abstract
Market distortions can lead to resource misallocation, which can further lead to inefficiency. Throughout the history of the trans-Atlantic slave trade, qualitative evidence of various sources of distortion abounds. No study, however, has quantified the inefficiency in the slave trade due to these distortions. We use a structural approach to identify the dispersion of distortions in the slave trade from wedges in first order conditions. We then calculate the TFP gains had the dispersion of distortions disappeared. Two main results emerge. First, dispersion of distortions had the smallest damage to TFP in Great Britain, followed by Portugal, and then France. Second, dispersion of distortions in the product market had a bigger impact on TFP than that of the capital and labor markets.
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