The North–South Wage Gap before and after the Civil War

Abstract

In an economy with "national" factor markets, the factor price effects of a permanent, regional specific shock register everywhere, perhaps with a brief lag. The United States in the nineteenth century does not appear to have been such an economy. Using data for a variety of occupations, I document that the Civil War occasioned a dramatic divergence in the regional structure of wages-in particular, wages in the South Atlantic and South Central states relative to the North fell sharply after the War. The divergence was immediate, being apparent as early as 1866. It was persistent: for none of the occupations examined did the regional wage structure return to its ante-bellum configuration by century's end. The divergence cannot be explained by the changing racial composition of the Southern wage labor force after the War, but does appear consistent with a sharp drop in labor productivity in Southern agriculture. I also use previously neglected data to argue that the South probably experienced a decline in the relative price of non-traded goods after the War.

Capital Destruction and Economic Growth: The Effects of Sherman's March, 1850-1920

“…As the American Civil War progressed into 1864 and Union General Ulysses S. Grant plotted the destruction of Confederate armies in Virginia, his colleague, General William Sherman, trained his sights on the destruction of the Confederate economy and infrastructure (Trudeau 2008, p. 40). Sherman had just finished the successful Atlanta Campaign, a collection of skirmishes from reduction in labor supply among newly freed African Americans, while Margo (2002) suggested the participation rate decline was also due to a decrease in labor demand, not an independent shift in supply. Wright (1986), on the other hand, claimed that a postwar reduction in world cotton demand-the South's staple cash crop-hurt the Southern economy most.…”

“…Goldin and Lewis (1975) estimated that the former Confederate states had a lower per capita income than other states and that income in the South fell after the war. 10 Wages fell in the South relative to the North after the war (Margo 2002), as did output per worker in manufacturing, driven in large part by declines in relative capital intensity (Hutchinson and Margo 2006). Goldin (1979) argues that there were three main reasons for the decline in Southern per capita income after the War-loss of economies of scale, decline in relative demand for southern cotton, and a decrease in ex-slave labor force participation-generally dismissing capital destruction as a factor.…”

The racial gap in education and the legacy of slavery

“…The exogeneity of the disembarked slaves variable as an instrument for the share of slaves in 1860 is even more realistic if we consider the discontinuity in the economic history of Southern US states provided by the Civil War which is largely documented, for instance, by Fogel and Engerman (1974), Margo (1990), Margo and Hutchinson (2001), and Ransom and Sutch (1977). After the Civil War, slavery is abolished, the gang system is abandoned (Fogel and Engerman, 1974;Ransom and Sutch, 1977), wages fall relative to the North (Margo, 2004), the cost of capital increases, and labor productivity decreases (Margo and Hutchinson, 2001). Therefore those factors which pushed Southern US states to engage in the slave trade, i.e., the relatively high productivity of slaves associated with the gang system, were reverted after the Civil War.…”

“…Fogel and Engerman (1974) argue that plantations which made a massive use of slavery had a higher productivity and they impute this effect to the use of the gang system of production. After 1860 the gang system is abandoned and according to Margo (2004) there is no evidence of a higher productivity of slavery over free labor under different systems of production. 20 This trend should exclude any income effect of the slave trade on the gap after the Civil War.…”

THE NORTH–SOUTH DIVIDE: REAL WAGES AND WELFARE IN BRAZIL DURING THE EARLY 20THCENTURY

“…However, new evidence suggests that Williamson overestimated regional disparity. I find wages in the Southeast were on average 1.5 times higher than in the Northeast, which is still a substantial gap but was not as large as the regional differences of other large countries, such as the United States, during this period (Chen 1941, p. 544;Margo 2002;Boustan 2017, p. 2). The large wage gap Williamson finds is the result of comparing different worker categories-skilled workers (carpenters, bricklayers and porters) in Rio de Janeiro and agricultural workers in Pernambuco-and an improper adjustment of the cost of living between regions (Lobo 1978a;Williamson 1995).…”