Determinants of homestead claims and the expansion of Western settlement

Abstract

This article examines the impact economic variables had on the rate of settlement, measured by original homestead claims, in the Western United States. Our results from the estimated panel regressions indicate that the underlying rationale for the Homestead Act, namely that economic factors were important for settlement, was justified. The two most important economic variables, output prices, measured by real wheat prices, and the cost of capital, measured by real interest rates, were statistically significant in explaining the change in the original homestead claims. Furthermore, contrary to previous studies, railroad mileage was not found to be significant. This study also reveals that the location of a homestead relative to the 100th meridian, the traditional boundary of humid and sub-humid areas, had little effect on the response of homesteaders to economic variables.

Keywords:

• homestead claims
• western settlement
• wheat prices
• panel regression

JEL Classification:

• C23
• N41
• N51

Notes

¹ Harley (1978) was the first to explore how western US expansion was related to economic factors. A more recent study was by Solakoglu (2008). There were, however, a series of articles exploring this issue in Canada; see Norrie (1975), Grant (1978), Marr and Percy (1978) and Borins (1982).

² This was one rationale for keeping the controversial ‘commutation’ clause in the Homestead Act. This allowed a homesteader to buy the land after a short period of residing on the land. Late in the nineteenth century, this was a source of much fraud.

³ Solakoglu (2008) used lagged endogenous variables as instruments for the two-stage least squares regressions reported in that work. That approach is not appropriate for our approach given that lags of all variables are already included in the model used in this article.