Description:

Jingyi Huang (Brandeis): Fence Laws: Liability Rules and Agricultural Development

Abstract: This paper uses the evolution of fence laws in the American West to show that liability assignment can influence resource allocation and productivity. Local fence laws assign animal trespassing liability to either farmers or livestock owners. I compiled a dataset documenting all county-level fence law changes from the earliest legislative session to 1930 for eight states on the Great Plains. I compare adjacent counties with different fence laws to identify the causal effect of liability assignment on agricultural development. Results show that liability assignments had persistent effects on land use, value of output, and settlement patterns. Shifting the liability from farmers to livestock owners increased acreage in farmland, investment in machinery, and grain production. These effects were driven by an increase in total land used for agricultural production, with no detectable impact on average productivity. On the other hand, increasing farmers’ liability shifted the composition of new settlement by reducing the share of land acquired through cash purchase, while it had no effect on homestead.