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Financial Asset Ownership and Political Partisanship: Liberty Bonds and Republican Electoral Success in the 1920s

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Listed:
  • Eric Hilt
  • Wendy M. Rahn

Abstract

We analyze the effects of ownership of liberty bonds, which were marketed to households during World War I, on election outcomes in the 1920s. In order to address the endogeneity of liberty bond subscriptions, we utilize the local severity of the fall 1918 influenza epidemic, which disrupted the largest liberty bond campaign, as an instrument. We find that counties with higher liberty bond ownership rates turned against the Democratic Party in the presidential elections of 1920 and 1924. This was a reaction to the depreciation of the bonds prior to the 1920 election (when the Democrats held the presidency), and the appreciation of the bonds in the early 1920s (under a Republican president), as the Fed raised and then subsequently lowered interest rates. Our results suggest the liberty bond campaigns had unintended political consequences and illustrate the potential for financial asset ownership to increase the sensitivity of ordinary households to economic policy decisions.

Suggested Citation

  • Eric Hilt & Wendy M. Rahn, 2018. "Financial Asset Ownership and Political Partisanship: Liberty Bonds and Republican Electoral Success in the 1920s," NBER Working Papers 24719, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24719
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    File URL: http://www.nber.org/papers/w24719.pdf
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    Cited by:

    1. George J. Hall & Thomas J. Sargent, 2020. "Debt and Taxes in Eight U.S. Wars and Two Insurrections," NBER Working Papers 27115, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N2 - Economic History - - Financial Markets and Institutions
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation

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