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Persistence in industrial policy impacts: Evidence from Depression-era Mississippi

Matthew Freedman

Journal of Urban Economics, 2017, vol. 102, issue C, 34-51

Abstract: This paper studies the effects of a large-scale industrial policy implemented in 1930s Mississippi on contemporaneous and modern-day labor market outcomes. Attracted by unprecedented government incentives under Mississippi’s Balance Agriculture with Industry (BAWI) Program, 13 large manufacturing plants established operations in the state between 1936 and 1940. Using difference-in-differences and synthetic control matching techniques, I find that counties that received these plants experienced an over 15% increase in female labor force participation on average in the short run. Moreover, these effects persisted decades into the future, well after many of the original companies shut down. I also find suggestive evidence of an increase in educational attainment among women in counties where BAWI investment occurred. The results highlight the potential for even transitory government interventions to have long-lived effects on labor markets.

Keywords: Industrial policy; Local labor markets; Agglomeration economies; Social norms; Gender inequality; Path dependence (search for similar items in EconPapers)
JEL-codes: H25 H71 J21 J78 N92 R11 R58 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:juecon:v:102:y:2017:i:c:p:34-51