Abstract
This paper documents the persistence of a local labor demand shock from a key episode of deindustrialization in the US: the decline of the New England textile industry in the 1920s. Although spatial equilibrium models predict worker migration in response to a loss of local employment, New England towns that heavily depended on the textile industry in 1900 did not experience a significant decline in population compared to other towns. Individuals in these towns, especially those with a lower level of wealth, were less likely to out-migrate. Adult workers switched to the agricultural sector and faced decreased occupational earnings. Using a matched difference-in-differences design that exploits variation in timing and location of large textile plant closures, I find that young individuals in plant closure towns increased their eighth-grade completion, but their labor market outcomes did not improve by 1940. My findings provide policy implications for local economic recovery, such as promoting diversity in the local industrial base.