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

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 sovereignty 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. Using this measure, the short-run effect of the Constitution on economic integration was minimal. This may have been because the Constitution did not eliminate all the institutional barriers to interstate trade before 1812.“No idea is more firmly planted in American history than the idea that one of the most difficult problems during the Confederation was that of barriers to trade between state and state. There had been such barriers in colonial times …”Merrill Jensen1“The ‘secret’ of American economic growth, English legal scholar Sir Henry Maine wrote in 1886, lay in ‘the [constitutional] prohibition against levying duties on commodities passing from State to State … . It secures to the producer the command of a free market over an enormous territory of vast natural wealth …’”Charles W. McCurdy2