How did the local color movement affect today's literature?
The local color movement, distinguished from the broader "regionalism" movement, was at its peak in the late 19th century (late 1800s). While local color is applied to writing that emphasizes any locale, like Bret Hart's California mining town stories, the writers in the South made particularly good use of the movement so the majority or local color work published depicted the Southern locale. Local color works were generally short stories and some are very frequently anthologized, such as the short stories of Kate Chopin.
The local color movement in the United States began after the Civil War as a reaction to the emergence of nationalism over regionalism; as a nostalgic yearning for the simpler times before the war; as a desire to idealize the lifestyle of a locale; and as a reaction against growing industrialization and urbanization with an attendant reduction in agrarian and rural communities. As the movement deepened, writers took a much less idealized approach to local color by attempting to show local life in a more realistic fashion.
To reiterate, the local color movement was most warmly and energetically embraced in the South, which eventually affected contemporary literature because it led to a later generation of Southern writers who explored the cold, hard realities of Southern life, including the topic of racism. Such authors would include William Faulkner, Robert Penn Warren and Thomas Wolfe. these writers, especially Faulkner, had a lasting influence on all American literature to follow.
[For more information, see "Regionalism and Local Color" from the Encyclopedia of Southern Culture.]