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The Dynamics of Relief Spending and the Private Urban Labor Market During the New Deal

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  • Todd C. Neumann
  • Price V. Fishback
  • Shawn Kantor

Abstract

During the New Deal the Roosevelt Administration dramatically expanded relief spending to combat extraordinarily high rates of unemployment. We examine the dynamic relationships between relief spending and local private labor markets using a new panel data set of monthly relief, private employment and private earnings for major U.S. cities in the 1930s. Impulse response functions derived from a panel VAR model that controls for time and city fixed effects show that a work relief shock in period t-1 led to a decline in private employment and a rise in private monthly earnings. The finding offers evidence consistent with contemporary employers' complaints that work relief made it more difficult to hire, even though work relief officials followed their stated policies to avoid affecting private labor markets directly. Meanwhile, negative shocks to private employment led to increases in work relief, consistent with Roosevelt's stated goal of using relief to promote relief and recovery.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13692.

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Date of creation: Dec 2007
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Handle: RePEc:nbr:nberwo:13692

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Cited by:
  1. Alex Klein & Keisuke Otsu, 2013. "Efficiency, Distortions and Factor Utilization during the Interwar Period," Studies in Economics 1317, Department of Economics, University of Kent.
  2. Price V. Fishback, 2010. "U.S. Monetary and Fiscal Policy in the 1930s," NBER Working Papers 16477, National Bureau of Economic Research, Inc.
  3. Price V. Fishback & Valentina Kachanovskaya, 2010. "In Search of the Multiplier for Federal Spending in the States During the Great Depression," NBER Working Papers 16561, National Bureau of Economic Research, Inc.
  4. Price V. Fishback, 2012. "Relief During the Great Depression in Australia and America," CEH Discussion Papers 005, Centre for Economic History, Research School of Economics, Australian National University.
  5. Pascal Michaillat, 2014. "A Theory of Countercyclical Government Multiplier," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(1), pages 190-217, January.
  6. Klein, Alexander & Leunig, Tim, 2013. "Gibrat’s Law and the British Industrial Revolution," CAGE Online Working Paper Series 146, Competitive Advantage in the Global Economy (CAGE).

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  1. Historical Economic Geography

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