13

In Table 5 we focus on racial inequality (measured by horizontal income inequality)

10.
and the effect
of slavery is even more significant.
11
In Model 1 the dummy for slave states is significant but turns
to be negative while the dummies for Southern and North Eastern counties are respectively
insignificant and marginally significant. In Model 2 we replace the slave states dummy with the
South dummy and then in Model 3 we restrict the estimates to former slave states only. Results for
both models are similar to those from Model 1. We therefore can conclude that there is a robust
relationship between slavery and current income and racial inequality.

Table 5: Slavery and Racial Inequality

Dependent Variable: Racial Inequality
Estimation Method: OLS Model 1 Model 2 Model 3

Slaves/Population 1860 0.178*** 0.162*** 0.179***
(26.33) (22.15) (26.70)
Population Density 1860 0.0102*** 0.0102*** 0.0532***
(5.83) (5.84) (2.83)
North East Dummy 0.00126 0.00475
(0.41) (1.57)
South Atlantic Dummy -0.00537* -0.00842*** -0.00597*
(-1.75) (-2.63) (-1.95)
Slave States Dummy -0.00647**
(-2.16)
South Dummy 0.00590*
(1.71)
Constant 0.0355*** 0.0320*** 0.0279***
(23.39) (23.21) (10.84)

Observations 1984 1984 1050
R-squared 0.40 0.40 0.40
Sample All Counties All Counties Slave States
*** p<0.01, ** p<0.05, * p<0.1. Robust t statistics in parentheses.
Next in Table 6 we estimate the effect of slavery on the share of the population below the poverty
level. As in previous tables in Model 1 we control for former slave states. In Model 2 we replace the
slave states dummy with the South dummy. Finally in Model 3 we restrict the estimates to counties
in former slave states only. The effect of slavery on the share of the population below poverty is
significant and positive under all specifications. It is therefore obvious to infer that slavery affects
the poverty rate (which is likely to be more prevalent among blacks) which in turn contributes to the
level of racial and income inequality within the country.

10
See Data Appendix.
11
Consistently, in Lagerlf (2005) slavery increases white income and decreases black income.