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Abstract
This paper uses newly digitized data to study the effects of the Fair Labor Standards Act (FLSA) of 1938 on the industrial development of the U.S. South. Implemented at a time of large regional wage disparities, the federal minimum wage and maximum hour regulations disproportionately affected the low-wage South. Contrary to the findings that minimum wage increments have no or small employment effects in more modern settings, we find substantial employment reductions in the manufacturing industries. This paper then builds and calibrates a general equilibrium model to formalize and quantify three arguments centering the regional development-national standards debate: the interstate commerce channel, the reverse structural change channel, and the industry upgrading channel. This is achieved by modeling multiple regions connected through trade, multiple industries connected through input-output linkages, a labor supply side characterized by a Roy model of worker selection, and a labor demand side implied by firm-level technology choices.