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Why did income growth vary across states during the Great Depression?

  • Thomas A. Garrett
  • David C. Wheelock

State per capita incomes became more disperse during the contraction phase of the Great Depression, and less disperse during the recovery phase. We investigate the effects of spatial dependence, industrial composition, bank failures and fiscal policies on state income growth during each phase. We find that industrial composition and spatial interdependencies contributed to negative state income growth during the contraction, whereas New Deal spending contributed to positive state income growth during the recovery phase. We find no evidence that differences in bank failure rates or state government expenditures contributed to variation in state income growth rates.

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File URL: http://research.stlouisfed.org/wp/2005/2005-013.pdf
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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2005-013.

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Date of creation: 2006
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Publication status: Published in Journal of Economic History, June 2006, 66(2), pp. 456-66
Handle: RePEc:fip:fedlwp:2005-013
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  1. Price V. Fishback & Shawn Kantor & John Joseph Wallis, 2002. "Can the New Deal's Three R's Be Rehabilitated? A Program-by-Program, County-by-County Analysis," NBER Working Papers 8903, National Bureau of Economic Research, Inc.
  2. Samolyk, Katherine A., 1994. "Banking conditions and regional economic performance evidence of a regional credit channel," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 259-278, October.
  3. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
  4. David C. Wheelock, 1995. "Regulation, market structure and the bank failures of the Great Depression," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 27-38.
  5. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
  6. Charles W. Calomiris, 1993. "Financial Factors in the Great Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 61-85, Spring.
  7. Burton A. Abrams & Margaret Z. Clarke & Russell F. Settle, 1999. "The Impact of Banking and Fiscal Policies on State-Level Economic Growth," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 367-378, October.
  8. Wallis, John Joseph, 1989. "Employment in the Great Depression: New data and hypotheses," Explorations in Economic History, Elsevier, vol. 26(1), pages 45-72, January.
  9. Christina D. Romer, 1991. "What Ended the Great Depression?," NBER Working Papers 3829, National Bureau of Economic Research, Inc.
  10. Crain, W Mark & Lee, Katherine J, 1999. "Economic Growth Regressions for the American States: A Sensitivity Analysis," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 242-57, April.
  11. Fleck, Robert K., 1999. "The Marginal Effect of New Deal Relief Work on County-Level Unemployment Statistics," The Journal of Economic History, Cambridge University Press, vol. 59(03), pages 659-687, September.
  12. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
  13. Garrett, Thomas A. & Marsh, Thomas L., 2002. "The revenue impacts of cross-border lottery shopping in the presence of spatial autocorrelation," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 501-519, July.
  14. Freeman, Donald G., 2002. "Did state bank branching deregulation produce large growth effects?," Economics Letters, Elsevier, vol. 75(3), pages 383-389, May.
  15. Philip E. Strahan, 2003. "The real effects of U.S. banking deregulation," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 111-128.
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