ABSTRACT
This chapter seeks to cast some empirical light on the role of adverse selection in the labor market by examining a very special sub-market; namely that for the sale of slaves in Pre-Civil War, New Orleans. The most straightforward test of adverse selection would be to compare the abilities of those changing jobs with the abilities of those who remain with their initial employers. Estimation of the degree of adverse selection is based on the fact that slaves were sold in the New Orleans market from regions of widely different labor productivity. If owners were adversely selecting slaves for sale, they would have been selling “bad” slaves with individual discounted values below their market price. In the absence of an observable negative relationship between transportation costs and price, the validity of the formal model rests solely on the observed relationship between productivity and price.
