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We study sectoral labor realloaction in the U.S. during the Great Depression by examining transitions between the farm and nonfarm sectors as well as movement within the farm sector. Towns and cities that are hit harder by the downturn see higher levels of out-migration to farms, suggesting that the widespread movement to farms serves as a source of migratory insurance. We also show that the more mechanized farming areas are far less able to provide this insurance function. In fact, while the subsistence agricultural sector gains large numbers of people during the crisis, the mechanized agricultural sector sheds workers. Instead of being released into more productive occupations, many of the workers leaving these mechanized areas are themselves moving into low-productivity or subsistence farming. This evidence suggests that economic downturns can interrupt the process of structural transformation and that the job losses associated with structural change may exacerbate the employment problem during economic downturns.


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