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Income shocks and housing spillovers: Evidence from the World War I Veterans’ Bonus

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  • Quincy, Sarah

Abstract

This paper documents how a one-time income shock can alter the household wealth distribution through local housing market channels. In 1936, the United States government unexpectedly gave World War I veterans a large income transfer. This payment, equivalent to 1936 per capita income, greatly improved recipients’ 1940 home values and homeownership rates compared to those of their 1930 neighbors. These home value gaps widened as the spatial intensity of the shock increased but only for likely home purchasers. Loan-level data suggest this combination of direct benefits and negative neighborhood spillovers derived from veterans crowding out other potential borrowers.

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  • Quincy, Sarah, 2022. "Income shocks and housing spillovers: Evidence from the World War I Veterans’ Bonus," Journal of Urban Economics, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:juecon:v:132:y:2022:i:c:s0094119022000717
    DOI: 10.1016/j.jue.2022.103494
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    More about this item

    Keywords

    Income shocks; Housing spillovers; Great Depression;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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