The impact of the Civil War on capital intensity and labor productivity in southern manufacturing

After the Civil War wages fell in the South relative to the non-South, but interest rates and other measures of the costs of capital increased. Using archival data for manufacturing establishments, we show that capital-output and capital-labor ratios in southern manufacturing declined relative to non-southern manufacturing after the War, precisely in the direction implied by the regional shifts in factor prices. Labor productivity in southern manufacturing also declined, and a significant portion of this decline can be attributed to the reduction in capital intensity.