The Economic Legacy of Racial Trauma in the American South

How does the trauma associated with exposure to racial violence affect economic outcomes? We study this question in the context of lynchings of Black citizens in the American South between 1880 and 1940 and provide systematic evidence of long-run economic impacts of that violence for the broader community and the effects’ persistence across generations. First, using data on averted lynchings and matched placebos as counterfactuals, we show that children indirectly exposed to the racial trauma of lynchings (proxied by close proximity to the victim’s household location) exhibit a reduction in occupational income score and likelihood of holding a white collar occupation, in their prime earning years as adults. We also observe intergenerational effects: children of the individuals who were exposed (as children) to lynchings see, as adults observed in 1940, a reduction in their income relative to counterfactual individuals. By documenting long-run and intergenerational economic effects of exposure to lynchings, we add empirical evidence to an interdisciplinary literature that identifies racial trauma as a distinctive and durable form of psychological harm.