The relative efficiency of slave agriculture: a comment

In their book Time on the Cross, Fogel and Engerman (FE) present evidence that average factor productivity was greater for larger Southern slave farms in 1860 than for both free farms and smaller slave farms. In a recent article, Field (1988) lends support to the FE theory by finding that an upward shift in the production function occurs for slave farms at 15 slaves, the size at which FE propose that gang labour became feasible. In a more recent article, Grabowski and Pasurka (GP) contradict both FE and Field by finding that there was no relationship between the size of slave farms and their efficiency. The present paper extends both GP's and Field's work and refines a point made by FE. We distinguish between a technological advantage due to the gang labour system and revenue inefficiency due both to the incentive structure of slavery and the repugnance of gang labour, two factors which foster rational shirking and resistance by slaves. That is, we propose that relative to small slave farms, large slave farms may have enjoyed a higher revenue frontier but that actual output and revenue fell farther below their frontier. Our construction is consistent with the historical view that emphasizes the harshness of slavery, the repugnance of the gang labour system, and the rational resisting behaviour of the slaves. We test this hypothesis with the stochastic frontier function approach as did GP. However, our findings contradict them. We find, consistent with both FE and Field, that large slave farms exhibited superior technology over small farms. More importantly, we find empirical confirmation of our theory that large slave farms suffered greater revenue inefficiency than smaller slave farms.