Spatial Structural Change∗

This paper studies the spatial implications of structural change. The secular decline in spending on agricultural goods hurts workers in rural locations and increases the return to moving towards nonagricultural labor markets. We combine detailed spatial data for the U.S. between 1880 and 2000 with a novel quantitative theory to understand this process and to quantify its macroeconomic implications. We find that spatial reallocation across labor markets accounts for almost none of the aggregate decline in agricultural employment. Despite ample migration, population net flows were only weakly correlated with agricultural specialization. Spatial reallocation nevertheless had important aggregate effects. Without migration income per capita would have been 15% lower and spatial welfare inequality would have been substantially higher, especially among low-skilled, agricultural workers. ∗We thank seminar participants at Boston University, Stanford, Penn State, UNC, the SED, the EEA, the NBER Macroeconomic Across Time and Space Conference, the Edinburgh Workshop on Agricultural Productivity and the Yale International Lunch for very helpful comments. We are particularly thankful to Simon Alder, Timo Boppart, David Lagakos, Doug Gollin, Kjetil Storesletten and Fabrizio Zilibotti for their suggestions. We also thank Costas Arkolakis, Pete Klenow, and Aleh Tsyvinski for their comments. Zara Contractor, Andrés Gvirtz and Adam Harris provided outstanding research assistance. †Yale University. [email protected] ‡Yale University and NBER. [email protected]