The long reach of cotton in the US South: Tenant farming, mechanization, and low-skill manufacturing

This paper examines the long-run impact of cotton agriculture on local development in the US South, focusing on a novel aspect of structural change. Exploiting climate-based variation in cotton production, I show that cotton specialization in the late 19th century had a negative impact on local development that lasts through 2010. This negative relationship, however, only became evident in the second half of the 20th century. I argue that the change was caused by the mechanization of cotton production, which began in the 1950s. After the mechanization, local manufacturing absorbed displaced cotton tenants with low human capital. In response to the inflow of cotton tenants, labor productivity in manufacturing began to decline and the effects persisted in the long-run. The persistent decline in manufacturing productivity is explained by directed technical change that reduced demand for skills in manufacturing. These results indicate that, depending on the agricultural background, structural change can negatively affect the evolution of technology and productivity in the industrial sector.