I suspect that Sag and Fodor are referring to traces in generative syntax. I don't know the definitive first proposal (it was probably in some samizdat paper or another), but can suggest some leads.
Start by looking at Chomsky and Lasnik's (1977) Filters and Control in Linguistic Inquiry 8(3) 425--504 for a detailed discussion on trace theory, as well as the subsequent criticism by Postal and Pullum in issue 9(1) of the same journal, as well as rejoinders and counter-criticism in subsequent issues.
Chomsky and Lasnik mention several papers where trace theory or its antecedents are developed, including Fiengo's (1974) dissertation, Chomsky's (1973) "Conditions on transformation", and (1977) "On Wh-movement." Bresnan's (1971) paper is also cited.