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Most of Light in August is set in the towns, villages, and countryside of the early 1930s Deep South. It is a land of racial prejudice and stern religion. Community ties are still strong: an outsider is really identifiable, and people gossip about their neighbors. In this part of the country, the past lives on, even physically. For example, the cabin in which Joe Christmas stays and in which Lena Grove gives birth is a slave cabin dating back to before the Civil War. And finally the South of this epoch is still close to nature. Right outside the town are the woods. All these aspects of the setting lend themselves especially well to Faulkner's favorite themes, for example, the relationships between the community and the individual and between the present and the past.
But Faulkner's setting is quite specific. Faulkner modeled his fictional Yoknapatawpha County on Lafayette County, Mississippi, and the city of Jefferson on his hometown, Oxford, and perhaps on neighboring Ripley as well. He describes his region's smells, sights, and sounds in loving detail: its chirping insects, its summer heat, its unique light. Some of Jefferson is a quite accurate rendering of Oxford-for example, the hilltop over which Lena first sees Jefferson in the distance, the ditch in which Joe Christmas briefly hides when pursued by Percy Grimm, almost all of the route Joe Christmas walks from the town barbershop through Freedman Town and back, and even the schedule of the Jefferson train that the Hineses take. (Note that the farther Faulkner gets from Jefferson the less detailed his descriptions of setting often become.)
Still, Faulkner felt free to modify his sources whenever it suited his fictional purposes. He removed Oxford's intellectual center, the University of Mississippi. And Presbyterians are a larger percentage of fictional Jefferson than of real-world northern Mississippi. This change helps Faulkner explore his interest in Calvinist and Puritan forms of Christianity. Of course, you must also remember that Mississippi in 1932 was quite different from what it is today. At that time racial segregation was enshrined in law; blacks were not permitted to vote, and many brutal lynchings occurred.
Specific residences are almost always Faulkner's fictional creations. The Jefferson of Light in August has four main centers: the town, the planing mill, the Burden estate, and Hightower's home. These latter two settings on Jefferson's physical outskirts reflect their occupants' psychological distance from the larger human community. And Joe's residence in a slave cabin on the Burden estate suggests the lack of equality in his relationship with Joanna, while Lena's stay in that same cabin suggests a symbolic connection between Joe's death and the birth of her child.
Even where setting doesn't symbolize character traits, it can help you understand a character. For example, Faulkner's description of the tiny hamlet of Doane's Mill sheds light on Lena Grove, especially when you realize that Doane's Mill was the biggest town this simple country girl had seen before she began her journey to Jefferson.