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How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s

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  • Fishback, Price

    (University of Arizona)

Abstract

The New Deal during the 1930s was arguably the largest peace-time expansion in federal government activity in American history. Until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of New Deal programs. Over the past decade scholars have developed new panel databases for counties, cities, and states and then used panel data methods on them to examine the examine the impact of New Deal spending and lending policies for the major New Deal programs. In most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy. Many of the studies also use instrumental variable methods to control for endogeneity. The studies find that public works and relief spending had state income multipliers of around one, increased consumption activity, attracted internal migration, reduced crime rates, and lowered several types of mortality. The farm programs typically aided large farm owners but eliminated opportunities for share croppers, tenants, and farm workers. The Home Owners’ Loan Corporation’s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers. The Reconstruction Finance Corporation’s loans to banks and railroads appear to have had little positive impact,although the banks were aided when the RFC took ownership stakes.

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  • Fishback, Price, 2016. "How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s," CAGE Online Working Paper Series 274, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:274
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    Cited by:

    1. Anna Aizer & Shari Eli & Adriana Lleras-Muney & Keyoung Lee, 2020. "Do Youth Employment Programs Work? Evidence from the New Deal," NBER Working Papers 27103, National Bureau of Economic Research, Inc.
    2. Vu, Tien & Yamada, Hiroyuki, 2020. "Impacts of enterprise zones on local households in Vietnam," MPRA Paper 99473, University Library of Munich, Germany.
    3. Fishback, Price & Fleitas, Sebastian & Rose, Jonathan & Snowden, Ken, 2020. "Collateral Damage: The Impact of Foreclosures on New Home Mortgage Lending in the 1930s," The Journal of Economic History, Cambridge University Press, vol. 80(3), pages 853-885, September.
    4. Chwieroth, Jeffrey M. & Walter, Andrew, 2019. "The financialization of mass wealth, banking crises and politics over the long run," LSE Research Online Documents on Economics 100765, London School of Economics and Political Science, LSE Library.
    5. Liu, Xing & Fishback, Price, 2019. "Effects of New Deal Spending and the downturns of the 1930s on private labor markets in 1939/1940," Explorations in Economic History, Elsevier, vol. 71(C), pages 25-54.
    6. Galofré Vilà, Gregori, 2020. "Quantifying the impact of aid to dependent children: An epidemiological framework⁎," Explorations in Economic History, Elsevier, vol. 77(C).
    7. Glauber, Joseph W. & Effland, Anne, 2016. "United States agricultural policy: Its evolution and impact:," IFPRI discussion papers 1543, International Food Policy Research Institute (IFPRI).

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-

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