We present a joint study of the U.S. structural transformation (the
decline of agriculture as the dominating sector) and regional convergence
(of southern to northern average wages). We find empirically
that most of the regional convergence is attributable to the structural
transformation: the nationwide convergence of agricultural wages to
nonagricultural wages and the faster rate of transition of the southern
labor force from agricultural to nonagricultural jobs. Similar results
describe the Midwest’s catch-up to the Northeast (but not the relative
experience of the West). To explain these observations, we construct
a model in which the South (Midwest) has a comparative advantage
in producing unskilled labor–intensive agricultural goods. Thus it
starts with a disproportionate share of the unskilled labor force and
lower per capita incomes. Over time, declining education/training
costs induce an increasing proportion of the labor force to move out
of the (unskilled) agricultural sector and into the (skilled) nonagricultural
sector. The decline in the agricultural labor force leads to an
increase in relative agricultural wages. Both effects benefit the South