In their September 2013 Journal of Economic History article “American Incomes Before and After the Revolution,” Lindert and Williamson use a social table approach to estimate income that counts people by occupation and combines it with estimates of average income. The results find that American colonial incomes on the eve of the Revolution in 1774 were higher than estimates by previous scholars. Moreover, average colonial incomes were higher than in England and Wales and inequality in the colonies was lower than England and Wales. However, incomes in the South were much higher than in the North even when the per capita income is calculated including the slave population.
For the period 1774 to 1800, the economic destruction of the war, the disruption of overseas trade and the damage to urban activity resulted in a series of negative economic shocks that reduced real per capita income by 20 percent and needed decades to recover from. What is more intriguing is the period from 1800 to 1840, which saw a recovery in per capita incomes but with unbalanced regional growth. Between 1800 and 1840, real per capita income in the North grew at annual rates of 2.3-2.4 percent per annum while in the South the annual growth rate was 0.5 to 0.7 percent per annum. By 1840, the South was well behind the North in per capita income.
I suppose one has to wonder if the economic decline of the U.S. South has it seeds right in the American Revolution? Institutions are innovated in response to perceived benefits. By the eve of the revolution, industry and manufacturing in the U.S. Northeast was being hampered by British mercantilist policies, which wished to limit or prohibit trade in manufactured goods between the colonies. The South was primarily a resource export region and despite imperial trade regulations benefited from the colonial arrangement. By the late colonial era, it is estimated that two thirds of American exports were from the South and the bulk were resource staples with little value added.
In light of this, it is probably no surprise then that support for the Revolution was greater in the North than the South. The North had more value added activities on the eve of the Revolution and a substantial shipping industry and its interests were increasingly not as well served by the British Imperial system – hence the desire for institutional innovation. In the short term, the disruption of the Revolutionary War and the transition to new institutions disrupted the economy of both the North and the South. The cost of the revolution in terms of a per capita income drop was high. However, in the long-term, it was the North that primarily benefitted from the new institutional arrangements and trade patterns and did so more than the South sending it into long-term decline. The American Revolution seems to have provided the greatest economic benefits to the northeastern United States.