Structural Change and Internal Labor Migration: Evidence from the Great Depression

We analyze sectoral labor reallocation and the reversal of urbanization in the U.S. during the Great Depression. The widespread movement to farms, which serves as a form of migratory insurance during the crisis, is largely towards farms with low levels of mechanization. In contrast, the mechanized agricultural sector sheds workers, many of whom reallocate into low-productivity or subsistence farming. The crisis perverts the normal process of structural change—in which workers displaced by farm equipment are released into more productive occupations—suggesting that macroeconomic fluctuations are an important factor determining the labor market consequences of technological change.