The Latent Legacy of Prohibition: Resistance Culture and Modern Entrepreneurial Resilience

This paper examines whether early 20th century state-level prohibitions on the sale and manufacture of alcohol influenced entrepreneurial responses to the COVID-19 crisis. During the period 1900-1920, approximately 1,600 counties in the United States voluntarily went dry (i.e., they prohibited the sale and manufacture of alcohol through local referenda or local ordinances), while an almost equal number of counties were forced to comply with state-level prohibitions. I argue that being forced to become dry fostered a long-lasting latent culture of adaptation and informal entrepreneurship. Using county-level data from 2010–2023, I find that exposure to forced prohibition is associated with a surge in new business applications =in the aftermath of the COVID-19 shock. This effect appears to be more pronounced in areas with low remote-work feasibility and stronger anti-prohibition sentiment as, for instance, measured by references to bootlegging and speakeasys in historical newspaper accounts and anti-prohibition party vote shares. My results suggest that informal entrepreneurial norms rooted in the resistance to prohibition had an enduring impact on economic adaptability and entrepreneurship.