This dissertation consists of three essays investigating the historical roots of economic development and inequality in the US South. The first essay examines the impact of slavery on long-run development. Using county-level data from the US South, I show that slavery has impeded long-run development through the human capital channel. The mechanism involves labor market institutions and their impact on demand for human capital. I find that the history of slavery hindered integration of black workers into the labor market. Moreover, border-county analyses show that selective application of laws and regulations was a primary tool for impeding labor market integration. Through estimating the relative return to education for each county, I further argue that blacks in a region with a greater legacy of slavery had fewer incentives to invest in human capital. The second essay studies the long run effects of cotton agriculture focusing on a novel aspect of structural change. I show that cotton specialization in the late 19th century had long-run negative impact on local development, and the negative relationship became only evident in the second half of the 20th century. I argue that the change was caused by the mechanization of cotton production. After cotton mechanization, cotton labor with low human capital was relocated to local manufacturing. In response to the inflow of cotton labor, there was a decline in labor productivity in manufacturing which persisted through directed technical change. Using census data, I show that initial cotton specialization reduces demand for skills in manufacturing even to this day. The third essay addresses the legacy of cotton agriculture on economic inequality. Using the Gini index of household income, I show that initial cotton specialization increased long-run economic inequality at the county level. Moreover, evidence from the census data indicates that cotton specialization increased wage inequality exclusively in the local service sector, without any effects on the other non-agricultural sectors. As an explanation, I argue that wage inequality in the service sector increased due to expansion of employment in low-wage occupations followed by a decrease in their wage level.