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The Intergenerational Effects of a Large Wealth Shock: White Southerners after the Civil War

Journal: American Economic Review

Date: 20211101

Author: Ager, Philipp; Boustan, Leah; Eriksson, Katherine

Abstract:
The nullification of slave wealth after the US Civil War (1861-1865) was one of the largest episodes of wealth compression in history. We document that White Southern households that owned more slaves in 1860 lost substantially more wealth by 1870, relative to Southern households that had been equally wealthy before the war. Yet, their sons almost entirely recovered from this wealth shock by 1900, and their grandsons completely converged by 1940. Marriage networks and connections to other elite families may have aided in recovery, whereas transmission of entrepreneurship and skills appear less central.

Link: Google Scholar

Key Findings

Substantial Wealth Loss

White southern households with slave assets lost 10-15% more wealth by 1870 compared to similarly wealthy households without slaves

Rapid Recovery

Sons of slaveholders completely recovered by 1880, with wealth levels equal to or greater than sons from comparable households

Social Network Resilience

Recovery was facilitated through white collar employment opportunities and advantageous marriages, suggesting importance of social networks

Wealth Distribution Changes 1860-1870

  • Southern wealth declined substantially across distribution from 1860 to 1870
  • Largest declines occurred at top of distribution (90th percentile)
  • Wealth compression reduced 90-50 ratio from 14:1 to 10:1

Sons' Recovery by Father's Wealth Level

  • Sons from 80-94th percentile families fully recovered by 1880
  • Sons from top 5% of families surpassed comparison group by 19%
  • Recovery persisted through 1900, showing long-term resilience

Occupational Shifts of Slaveholder Sons

  • Medium-sized slaveholder sons (3-16 slaves) shifted to white collar work
  • Largest slaveholder sons (17+ slaves) maintained agricultural focus
  • Occupational adaptation shows different recovery strategies by wealth level

Contribution and Implications

  • Demonstrates remarkable persistence of southern elite despite unprecedented wealth shock
  • Highlights importance of social networks over pure financial capital in maintaining status
  • Suggests limitations of wealth redistribution alone in creating lasting social change

Data Sources

  • Wealth distribution chart based on Table 1 showing wealth levels by percentile in 1860 and 1870
  • Recovery trajectory visualization derived from Table 2 coefficients for wealth effects across generations
  • Occupational shifts chart constructed from Tables 4 and 10 showing son outcomes in 1880