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

W Hanlon ()

No 79, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: Urban economies are often heavily reliant on a small number of dominant industries, leaving them vulnerable to negative industry-specific shocks. This paper analyzes the long-run impacts of one such event: the large, temporary, and industry-specific shock to the British cotton textile industry caused by the U.S. Civil War (1861-1865), which dramatically reduced supplies of raw cotton. Because the British cotton textile industry was heavily concentrated in towns in Northwest England, I compare patterns in these cotton towns to other English cities. I find that the shock had a persistent negative effect on the level of city population lasting at least 35 years with no sign of diminishing. Decomposing the effect by industry, I use new data to show that the shock to cotton textiles was rapidly transmitted to local firms in other industries, leading to increased bankruptcies and long-run reductions in employment. This transmission occurred primarily through the link to capital suppliers, such as machinery and metal-goods producers. As a result of these cascading effects, roughly half of the reduction in city-level employment growth in cotton towns during the Civil War was due to the impact on industries other than cotton textiles.

New Economics Papers: this item is included in nep-his and nep-ure
Date: 2015
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Working Paper: Temporary Shocks and Persistent Effects in the Urban System: Evidence from British Cities after the U.S. Civil War (2014) Downloads
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More papers in 2015 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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