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To really understand the significance of setting in any novel, you might ask yourself what the author might have intended by creating the setting that she did. Edith Wharton didn't set Ethan Frome in a small New England town called Starkfield as a matter of ease and simplicity. She carefully constructed a town and its residents in a way that served to enhance her themes of isolation, decay, and despair.
Just the name of town, Starkfield, is significant. Stark suggests barren, which certainly matches all of the descriptions of the Frome farm and home. It is starkly in the middle of the countryside and isolated by having no close neighbors. The orchards on the land barely produce enough to provide a meager sustenance for the Frome family. The house itself is stark and unwelcoming with dead vines along the front, shutter-less windows and a broken wall, the "L" that would have connected the farm house to the barns.
Nothing about this place seems comfortable or easy. The town itself is not all that properous and its inhabitants are pleasant people who eek out a living as best they can. It is a place of stark survival. Adding to the starkness of the place is the fact that a good portion of the actual story is set in the winter time. New England winters are brutal, with snow and cold, which also serves to isolate the people.
The setting of the novel serves to reinforce the characterization of Ethan Frome. Ethan is a man living a very stark life with a wife, Zeena, whom he does not love and only married because he was afraid of being alone. He has no economic security and no means with which to get a divorce or even finance a trip West to persue some other life with Mattie. He has friendships with people in town and everyone knows his story, so he doesn't think it right to take advantage of them or to leave Zeena--society's expectations of him weigh heavily on his shoulders. The only out he can attempt is the ill-fated double suicide by sledding (something he clearly had misgivings about). After the crash-up, Ethan is forever trapped in the stark house, on the stark land, in a stark town, with stark people. He maintains his dignity, but it costs him everything else.
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