Temporary Shocks and Persistent Effects in Urban Economies: Evidence from British Cities after the U.S. Civil War

Abstract

Can a temporary economic shock to an important local industry influence long-run city population? To answer this question I study the large temporary shock to British cities important cotton textile industry. I show that this event temporarily reduced the growth rate of cities specialized in cotton textile production, relative to other English cities, and led to a persistent change the level of city population.

Trade Competition and Migration: Evidence from the Quartz Crisis

“…Unlike the China shock, this was essentially a crisis without opportunity for Switzerland. This is much closer in spirit to the British cotton shock studied by Hanlon (2017); however, unlike that shock, this one was effectively permanent. Given the relatively high labor costs in Switzerland, and their technological disadvantage in the production of liquid crystal displays (commonly used in quartz watches), the Swiss stood to gain relatively little from embracing the low-margin quartz market.…”

“…Many studies have examined the impact of trade disruptions on local labor markets; a smaller number have extended this to examine how these labor market changes translate into migration patterns, with differing results. Similar in spirit to this study, Hanlon (2017) analyzes the effect of a temporary shock to the British textile industry due to cotton shortages stemming from the U.S. Civil War. He finds that this trade shock led to a temporary decline in relative growth and a persistent decline in the population level for cities specializing in textile production.…”

Shaking Up the Equilibrium: Natural Disasters, Economic Activity, and Immigration

“…Bleakley and Lin (2012) and Henderson et al (2016) show that fundamentals that were historically important at the time when cities were founded leave a permanent mark on the spatial distribution of economic activity due to scale economies. Hanlon (2016), Moradi (2016), Jedwab et al (2017), and Michaels and Rauch (2018) all obtain similar conclusions by finding persistent e↵ects of historical events on the geographic distribution of economic activity. 12 In contrast, Davis and Weinstein (2002), Brakman et al (2004), Miguel andRoland (2011), andSanso-Navarro, Sanz and find no long-run e↵ects of war-related events on relative city sizes.…”

“…Thus, by assumption, the Stable Unit Treatment Value Assumption (i.e., potential outcomes for any unit should be una↵ected by treatments assigned to other units) is not satisfied, since the null hypothesis under investigation is that the shock did not have any e↵ect on relative population size in the American West. A similar approach is taken byHanlon (2016).…”

Engines of growth: essays in Swedish economic history

“…Evidence that these extreme reductions in city populations had no long-run effect on cities' industrial structure or population instead suggests that first nature geography is the most relevant explanation for the spatial structure of the economy. 4 More broadly, a growing historical literature examines the respective role of both first and second nature geography in shaping the spatial distribution of economic activity from the pre-industrial era to the 20 th century suggesting that while both factors mattered, second nature factors became relatively more important as industrialization progressed (e.g., Kim, 1995;Crafts and Mulatu, 2005;Wolf, 2007;Klein and Crafts, 2011;Crafts and Wolf, 2014;Bosker and Buringh, 2015;Hanlon, 2015). 5 4 Although much of this literature has exploited natural experiments, which may have limited external validity, recent contributions have also evaluated the feasibility of "big push" policies.…”