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Does the distribution of New Deal spending reflect an optimal provision of public goods?

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  • Jason Taylor

    ()
    (Central Michigan University)

  • Fred Bateman

    (Terry College of Business, University of Georgia)

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    Abstract

    Since 1969 more than a dozen studies have explored the grossly unequal state-level distribution of New Deal spending. Why did small population rural states such as Nevada, Montana, and Wyoming receive up to six times as many federal dollars per capita as densely populated states such as Connecticut, Rhode Island, and New York? Empirical studies employing economic and political variables have had mixed results in explaining this distribution. What past studies neglect is that a large proportion of New Deal dollars went towards the creation of public goods, which had spillover effects particularly upon those who lived in close proximity to these projects. This note suggests that the state-level distribution of per capita expenditures during the 1930s is consistent with what would be expected to follow from an economically efficient allocation of public goods.

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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume8/EB-07H40002A.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 8 (2007)
    Issue (Month): 3 ()
    Pages: 1-5

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    Handle: RePEc:ebl:ecbull:eb-07h40002

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    1. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
    2. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
    3. Atlas, Cary M, et al, 1995. "Slicing the Federal Government Net Spending Pie: Who Wins, Who Loses, and Why," American Economic Review, American Economic Association, vol. 85(3), pages 624-29, June.
    4. David Alan Aschauer, 1997. "Do States Optimize?: Public Capital and Economic Growth," Economics Working Paper Archive wp_189, Levy Economics Institute.
    5. Anderson, Gary M & Tollison, Robert D, 1991. "Congressional Influence and Patterns of New Deal Spending, 1933-1939," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 161-75, April.
    6. Fishback, Price V. & Kantor, Shawn & Wallis, John Joseph, 2003. "Can the New Deal's three Rs be rehabilitated? A program-by-program, county-by-county analysis," Explorations in Economic History, Elsevier, vol. 40(3), pages 278-307, July.
    7. Alicia H. Munnell, 1990. "How does public infrastructure affect regional economic performance?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 34, pages 69-112.
    8. Wallis, John Joseph, 1984. "The Birth of the Old Federalism: Financing the New Deal, 1932–1940," The Journal of Economic History, Cambridge University Press, vol. 44(01), pages 139-159, March.
    9. Reading, Don C., 1973. "New Deal Activity and the States, 1933 to 1939," The Journal of Economic History, Cambridge University Press, vol. 33(04), pages 792-810, December.
    10. Fleck, Robert K., 2001. "Population, Land, Economic Conditions, and the Allocation of New Deal Spending," Explorations in Economic History, Elsevier, vol. 38(2), pages 296-304, April.
    11. Robert K. Fleck, 1999. "Electoral Incentives, Public Policy, and the New Deal Realignment," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 377-404, January.
    12. Wallis, John Joseph, 1987. "Employment, Politics, and Economic Recovery during the Great Depression," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 516-20, August.
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    Cited by:
    1. Jim F. Couch & David L. Black & Philip A. Burton, 2009. "Efficiency considerations and the allocation of new deal funds: an examination of the public goods explanation of expenditure patterns," Economics Bulletin, AccessEcon, vol. 29(4), pages 3126-3133.

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