Working Paper: NBER ID: w20471
Authors: W. Walker Hanlon
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 show that the shock to cotton textiles was transmitted to other local firms, 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. Roughly half of the reduction in city-level employment growth was due to the impact on industries other than cotton textiles.
Keywords: No keywords provided
JEL Codes: F14; N63; N93; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shock to the British cotton textile industry due to the US Civil War (N61) | city population levels (R23) |
| shock to the British cotton textile industry due to the US Civil War (N61) | employment growth in cotton textile towns (L67) |
| shock to the British cotton textile industry due to the US Civil War (N61) | increased bankruptcies in local firms in metal machinery sector (G33) |
| shock to the British cotton textile industry due to the US Civil War (N61) | long-run reductions in employment in local firms (J63) |
| reduction in city-level employment growth (R11) | impacts on industries other than cotton textiles (L67) |