Between 1880 and 1920, the US agricultural employment share fell from 50% to 25%. However, despite aggregate demand shifting away from their sector of specialization, rural labor markets saw faster wage growth and industrialization than non-agricultural parts of the US. We propose a spatial model of the structural transformation to analyze the link between aggregate structural change and local economic development. The calibrated model shows that rural areas adapted to the decline of the agricultural sector by adopting technologies already in use in urban locations. Without such catchup growth, economic development would have been urban-biased and spatial inequality would have increased.
Authors
- Acknowledgements & Disclosure
- We are grateful to Simon Alder, Costas Arkolakis, Timo Boppart, David Lagakos, Claudia Goldin, Doug Gollin, Joe Kaboski, Pete Klenow, Pascual Restrepo, Esteban Rossi-Hansberg, Gregor Schubert, Kjetil Storesletten, Aleh Tsyvinski, and Fabrizio Zilibotti for their suggestions. We particularly thank Claudia Steinwender and Andy Foster for their insightful discussions at the AEA and the NBER DEV meetings, and Matthew Jaremski for sharing his data on bank branches. We also thank seminar participants at Boston University, Stanford, Penn State, Harvard, UNC, the University of Munich, the SED, the EEA, the NBER Macroeconomic Across Time and Space Conference, the NBER Trade and Geography Conference, the NBER Development Meeting, the NBER Inequality and Macroeconomics Meeting, and STEG. Andrés Gvirtz provided outstanding research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w30489
- Published in
- United States of America
