The Dynamics of Adverse Selection in the Market for Slaves
In the decades before the American Civil War, there was a large net migration of slaves from the American Old South to the New South. If the slaves sold from the Old South to the New South were adversely selected, the unobservable quality of slaves in the Old South would have increased over time relative to slaves in the New South. In equilibrium, this quality difference would be reflected in prices. I estimate the evolution of relative prices of observably identical slaves from the Old South and New South. In the 1810s, slaves from the Old South commanded prices 15 percent lower than identical slaves from the New South; by the 1850s, they commanded prices 14 percent higher. I combine these price data with data on slave populations, interregional sales, and other slave migration to infer the degree of adverse selection. I find the expected quality of a slave who was sold was just 61 percent of the quality of his unsold cousin.
Sin, Isabelle. 2008. "The Dynamics of Adverse Selection in the Market for Slaves," Stanford Working Paper.