Did_New_Deal_Grant_Programs_Stimulate_Lo

Did_New_Deal_Grant_Programs_Stimulate_Lo - Did New Deal...

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36 Did New Deal Grant Programs Stimulate Local Economies? A Study of Federal Grants and Retail Sales During the Great Depression P RICE V. F ISHBACK , W ILLIAM C. H ORRACE , AND S HAWN K ANTOR Using data on New Deal grants to each U.S. county from 1933 to 1939, we es- timate how relief and public works spending and payments to farmers through the Agricultural Adjustment Administration influenced retail consumption. On a per capita basis, we find that an additional dollar of public works and relief spending was associated with a 44 cent increase in 1939 retail sales. In contrast, the AAA seems to have had a negative effect on retail sales, suggesting that nonlandowners in the farm sector suffered disproportionate declines in income as a result of the AAA. he New Deal launched the most dramatic peacetime expansion of the federal government in U.S. history. The Roosevelt administra- tion launched a myriad of new federal programs, including regulations and federal mandates, social insurance programs, and an unprecedented amount of new federal spending. Annual federal outlays outside of the traditional categories of national security and international affairs were four to six times higher in the 1930s than in 1929. 1 In response to the Great Depression, the Roosevelt administration funded a variety of dif- The Journal of Economic History , Vol. 65, No. 1 (March 2005). © The Economic History Association. All rights reserved. ISSN 0022-0507. Price Fishback is Frank and Clara Kramer Professor of Economics, University of Arizona, Tucson, AZ 85721, and Research Associate, National Bureau of Economic Research, Cam- bridge, MA. E-mail: [email protected] William Horrace is Associate Professor of Economics, Syracuse University, Syracuse, New York 13244, and Research Economist, Na- tional Bureau of Economic Research. E-mail: [email protected] Shawn Kantor is Professor of Economics, University of California, Merced, Merced, CA 95344, and Research Associate, National Bureau of Economic Research. E-mail: [email protected] The authors are deeply indebted to Larry Neal and Joseph Mason who facilitated the collection of the New Deal data used in the article. We would also like to thank Stanley Engerman, William Evans, Paul Gertler, Michael Haines, Daniel Houser, Ryan Johnson, Lawrence Katz, Harry Kelejian, Steven Levitt, Robert Margo, Ronald Oaxaca, John Wallis, Gavin Wright, and two anonymous referees for their comments and suggestions for improving the manuscript. University seminar participants at Arizona, Cambridge, Clemson, Dartmouth, Emory, Florida State, George Mason, Kentucky, London School of Economics, Miami (Ohio), Missouri, Oxford, Rutgers, Syra- cuse, UCLA, Virginia, Virginia Tech, Williams, and the audiences at the Third World Cliometrics Congress, the conference in honor of Lance Davis, the NBER conference on government spending in December 2002, and the NBER group on the Development of the American Economy have provided valuable advice. Financial support has been provided by National Science Foundation Grants SBR-9708098, SES-0080324, and SES-0214395, the Earhart Foundation, the University of Arizona Foundation, and the University of Arizona Office of the Vice President for Research. We
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