Time to Accumulate: The Great Migration and the Rise of the American South

The idea that labor scarcity can induce economic development has long been hypothesized (Hicks, 1932; Habakkuk, 1962), but the evidence remains limited. This paper examines how the Second Great Migration (1940–1970) spurred structural change in the American South between 1970 and 2010. Empirical results using shift-share instruments show that out-migration incentivized capital investment and capital-augmenting technical change, increasing capital per worker and output in both agriculture and manufacturing, at least until 2010. Labor was reallocated from agriculture to non-agriculture. I then develop a dynamic spatial equilibrium model that allows for substitution between factors of production, factor-biased technical change, and factor abundance-based trade to characterize this process. The quantitative analysis indicates that labor-capital substitution played a major role in adjustments to South-to-North migration.