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U.S. City Finances and the Growth of Government, 1850–1902

Published online by Cambridge University Press:  03 March 2009

John B. Legler ,
Richard Sylla  and
John J. Wallis
John B. Legler
Affiliation:
Professor of Banking and Finance in the College of Business Administration at the University of Georgia, Athens, GA 30602
Richard Sylla
Affiliation:
Professor of Economics and Business at North Carolina State University, Raleigh, NC 27695
John J. Wallis
Affiliation:
Assistant Professor of Economics, University of Maryland, College Park, MD 20742
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Abstract

In terms of revenues and expenditures, local government was the largest component of the U.S. federal system in 1902. Although it has been conjectured that this was also true during most of the nineteenth century, the evidence to support the conjecture is weak. We present a summary of a large sample of data for individual cities in 1850, 1860, and 1870, and link it to census data for 1880, 1890, and 1902.We study effects of city size and geographical location, and trends over time in city fiscal activity. Our provisional conclusion is that local government became the largest of the three components in the federal system only toward the end of the nineteenth century.

Type
Papers Presented at the Forty-Seventh Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 48 , Issue 2 , June 1988 , pp. 347 - 356
Copyright
Copyright © The Economic History Association 1988

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References

1 Derived from U.S. Bureau of the Census, Historical Statistics of the United States, bicentennial edition (Washington, D.C., 1975), series Y522, p. 1120; Y592, p. 1123; Y671, p. 1127, and Y819, p. 1134.Google Scholar

2 Davis, Lance E. and Legler, John B., “The Government in the American Economy 1815–1902: A Quantitative Study”, this JOURNAL, 26 (12 1966), pp. 514–52.Google Scholar

3 For an example, see Sylla, Richard, “Long-Term Trends in State and Local Finances: Sources and Uses of Funds in North Carolina, 1800–1877”, in Engerman, Stanley L. and Gailman, Robert E., eds., Long-Term Factors in American Economic Growth (Chicago, 1986), pp. 819–68.Google Scholar

4 The urbanization percentages are derived from Bureau of the Census, Historical Statistics, bicentennial, series A57–A69.Google Scholar

5 U.S. Department of the Interior, Census Office, Valuation, Taxation, and Public Indebtedness in the United States as Returned at the Tenth Census (Washington, D.C., 1884);Google ScholarU.S. Department of the Interior, Census Office, Report on Wealth, Debt, and Taxation at the Eleventh Census: 1890, Part II, Valuation and Taxation (Washington, D.C., 1895);Google ScholarU.S. Department of Commerce and Labor, Bureau of the Census, Statistics of Cities Having a Population of Over 25,000, 1902 and 1903 (Washington, D.C., 1905), bulletin no. 20;Google ScholarU.S. Department of Commerce and Labor, Bureau of the Census, Statistics of Cities Having a Population of 8,000 to 25,000: 1903 (Washington, D.C., 1906), bulletin no. 45.Google Scholar

6 See Table 3 for a listing of some of the general and financial histories containing city financial data. Others include Gamble, Thomas, A History of the City Government of Savannah, Georgia from 1790 to 1901 (Savannah, 1901);Google ScholarLarson, Laurence M., A Financial and Administrative History of Milwaukee, Bulletin of the University of Wisconsin, no. 242 (Madison, 1908);Google ScholarOakes, Eugene E., Studies in Massachusetts Town Finance (Cambridge, Mass., 1937);CrossRefGoogle Scholar and Paige, Lucius R., History of Cambridge, Massachusetts, 1630–1877 (Boston and New York, 1877).Google Scholar

7 We have determined from Bureau of the Census, Financial Statistics of Cities Having a Population of Over 30,000, 1912 (Washington, D.C., 1914), p. 15, that our revenue sample covers 63 percent of cities with 30,000 or more population and 81 percent of the total population of such cities in 1850. In 1860, the corresponding average is 69 percent and 92 percent. In 1870, it is 48 percent and 68 percent. The expenditure sample covers 47 percent of the cities having 87 percent of the population of such cities in 1850. The corresponding percentages for 1860 are 58 and 76; those for 1870 are 50 and 72. For cities of 8,000 to 30,000 population, our coverage is approximately 26, 22, and 14 percent of the population of such cities in 1850, 1860, and 1870. For the three years 1850, 1860, and 1870, the range of the distribution of the total sample population by geographical region is: New England, 18–23 percent; Middle Atlantic, 40–55 percent; South, 9–15 percent; Midwest, 17–20 percent; and West, 2–4 percent.Google Scholar

8 To obtain real values, nominal per capita values were deflated by the Warren-Pearson wholesale Price Index spliced with the Bureau of Labor Statistics Wholesale Price Index, with 1914 = 100. both are taken from U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, D.C., 1960), series El and E13.Google Scholar

9 Gallman, Robert E., “Gross National Product in the United States, 1834–1909”, in National Bureau of Economic Research, Output, Employment, and Productivity in the United States after 1800, Studies in Income and Wealth, vol. 30 (New York, 1966), pp. 3–76.Google Scholar

10 These estimates are generated by comparing average actual tax revenues in all cities in 1850 and 1900 to average tax revenues using the 1850 population shares and the 1900 tax revenues by city size, and to average tax revenues using the 1850 tax revenues and the 1900 population shares by city size. Similar results are found for expenditures and other fiscal measures.Google Scholar

11 U.S. Bureau of the Census, Historical Statistics, bicentennial, series A172 and A178. In 1850, the South and the Midwest had about the same percentage of urban population to total population.Google Scholar

12 The calculations are based on U.S. Bureau of the Census, Historical Statistics, Colonial, series A3, El, E13, Y254, and Y255.Google Scholar

13 These estimates, which are weighted by state population, are yet unpublished, but an idea of the nature of our on-going project can be obtained by referring to two published papers: Richard Sylla, “Long-Term Trends in State and Local Finance: North Carolina, 1800–1977”;Google Scholar and Sylla, Richard, Legler, John B., and Wallis, John J., “Banks and State Public Finance in the New Republic: The United States, 1790–1860”, this JOURNAL, 47 (06 1987), pp. 391–403.Google Scholar

14 Smolensky, Eugene, “Industrial Location and Urban Growth”, chap. 15 in Davis, Lance et al. , American Economic Growth: An Economist's History of the United States (New York, 1972), p. 607.Google Scholar