Small Farms, Large Transaction Costs: Haiti’s Missing Sugar Craig Palsson Huntsman School of Business Utah State University∗ Abstract Haiti was the world’s leading sugar producer, but when cane surged in the Caribbean in the early 20th century, Haiti produced none. Instead, land sat idle while workers emigrated to work on sugar plantations. I examine the hypothesis that historical property rights institutions created high transaction costs for converting land to cane production. New land-use data from 1928-1950 and a proxy for transaction costs support the hypothesis. Furthermore, I show a labor supply shock pushed idle land into agriculture, but largely into subsistence farming. The evidence suggests transaction costs impeded the land market from responding to the sugar boom. ∗I thank Timothy Guinnane, Christopher Udry, and Naomi Lamoreaux for their guidance. I also appreciate helpful comments from Jose-Antonio Espin-Sanchez, Amanda Gregg, Claire Brennecke, Shameel Ahmad, Jakob Schneebacher, Jialu Chen, Fabian Schrey, Eric Hilt, Alan Dye, Noel Maurer, and participants at Yale seminars, the Economic History Association, NBER DAE, NEUDC, Universidad de los Andes, UC Davis, UC Berkeley, and the Naval Postgraduate School. This paper was written while I was on a National Science Foundation Graduate Research Fellowship. Contact the author at
[email protected]. 1 Explaining the disparity between rich and poor countries has always sat at the center of economic inquiry, but no country demands an explanation more than Haiti. In the 18th century, Haiti’s colonial economy was the most productive in the world, and even in the 19th century its post- Independence small-farm economy outperformed the Dominican Republic and other Caribbean neighbors (Bulmer-Thomas 2012, p.