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The Impact of New Deal Expenditures on Local Economic Activity: An Examination of Retail Sales, 1929-1939

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  • Price V. Fishback
  • William C. Horrace
  • Shawn Kantor

Abstract

**Revised version 2005** This paper empirically examines the New Deal's impact on local economic activity, as measured by retail sales, during the 1930s. Using a recently-uncovered data set that describes over 30 federal New Deal spending, loan, and mortgage insurance programs across all U.S. counties from 1933 to 1939, we estimate how the various New Deal programs that were designed to accomplish different objectives influenced retail spending. Our empirical approach accounts for both the simultaneity between New Deal allocations and economic activity and the geographic spillovers that likely resulted when spending in one county may have affected the economies of its neighbors. We find that New Deal spending on public works tended to promote retail sales in both the county where the money was spent and in contiguous neighbors, while spending on work relief increased economic activity in the county where the money was spent but at the expense of neighboring counties. Agricultural spending that limited production was associated with lower retail spending. New Deal loan programs appear to have had little or a somewhat negative effect. Finally, increases in the value of mortgages insured by the Federal Housing Administration had a strong positive effect on local economic growth during the Depression.

Suggested Citation

  • Price V. Fishback & William C. Horrace & Shawn Kantor, 2001. "The Impact of New Deal Expenditures on Local Economic Activity: An Examination of Retail Sales, 1929-1939," NBER Working Papers 8108, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8108
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    References listed on IDEAS

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    Cited by:

    1. Price Fishback, 2010. "US monetary and fiscal policy in the 1930s," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 385-413, Autumn.
    2. Price V. Fishback & Werner Troesken & Trevor Kollmann & Michael Haines & Paul W. Rhode & Melissa Thomasson, 2011. "Information and the Impact of Climate and Weather on Mortality Rates During the Great Depression," NBER Chapters,in: The Economics of Climate Change: Adaptations Past and Present, pages 131-167 National Bureau of Economic Research, Inc.
    3. Price Fishback & Samuel Allen & Jonathan Fox & Brendan Livingston, 2010. "A Patchwork Safety Net: A Survey Of Cliometric Studies Of Income Maintenance Programs In The United States In The First Half Of The Twentieth Century," Journal of Economic Surveys, Wiley Blackwell, vol. 24(5), pages 895-940, December.
    4. Michael Brocker & Christopher Hanes, 2014. "The 1920s American Real Estate Boom and the Downturn of the Great Depression: Evidence from City Cross-Sections," NBER Chapters,in: Housing and Mortgage Markets in Historical Perspective, pages 161-201 National Bureau of Economic Research, Inc.
    5. Mason, Joseph R., 2003. "The political economy of Reconstruction Finance Corporation assistance during the Great Depression," Explorations in Economic History, Elsevier, vol. 40(2), pages 101-121, April.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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