how successful was the new deal the microeconomic impact of new deal spending and lending policies in the 1930s 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 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

what or who started the great depression abstract herbert hoover i develop a theory of labor market failure for the depression based on hoover s industrial labor program that provided industry with protection from unions in return for keeping nominal wages fixed i find that the theory accounts for much of the depth of the depression and for the asymmetry of the depression across sectors the theory also can reconcile why deflation low nominal spending apparently had such large real effects during the 1930s but not during other periods of significant deflation

comparisons of weekly hours over the past century and the importance of work sharing policies in the 1930s abstract changes in the work week drove a larger portion of changes in total labor input during the great depression of the 1930s than during other decades work sharing policies appear to be responsible herbert hoover created various work sharing committees led by key industrialists which pushed for shorter work weeks and franklin roosevelt s president s reemployment agreement called for sharp cuts in weekly work hours spreading available work amongst more people was the goal during these periods between 50 and 90 percent of declines in labor input were accommodated by falling hours in recent decades employers have instead relied on layoffs to achieve the same end

how large is the government spending multiplier evidence from world bank lending this paper proposes a novel method of isolating fluctuations in public spending that are likely to be uncorrelated with contemporaneous macroeconomic shocks and can be used to estimate government spending multipliers the approach relies on two features unique to many low income countries 1 borrowing from the world bank finances a substantial fraction of public spending and 2 actual spending on world bank financed projects is typically spread out over several years following the original approval of the project these two features imply that fluctuations in spending on world bank projects in a given year are in large part determined by fluctuations in project approval decisions made in previous years and so are unlikely to be correlated with shocks to output in the current year world bank project level disbursement data are used to isolate the component of public spending associated with project approvals from previous years which in turn can be used to estimate government spending multipliers in a sample of 29 aid dependent low income countries the estimated multipliers are small reasonably precisely estimated and rarely significantly different from zero

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 social welfare programs in the usa are designed to serve as safety nets for people in hard times in contrast with the universal approach found in many other developed western nations in a survey of cliometric studies of social welfare programs in the usa we examine the variation in the safety net in the usa across states in the 20th century the determinants of the variation and its impact on socioeconomic outcomes the usa has always displayed substantial variation in the extent of the safety net because the features of most public social welfare programs have been and currently are determined by local and state governments even after the federal government became involved in the 1930s differences across states persist strongly for typically a decade although the persistence weakens with time and there are some periods when federal intervention led to a re ordering the rankings of state benefits differ from program to program and economic and political factors have different weights in determining benefit levels in panel data estimation of their effects variation in benefits across programs during the early 1900s had significant impact on labour markets economic activity family formation death rates and crime copyright 2010 blackwell publishing ltd

how well does advertising work generalizations from meta analysis of brand advertising elasticities abstract the authors conduct a meta analysis of 751 short term and 402 long term direct to consumer brand advertising elasticities estimated in 56 studies published between 1960 and 2008 the study finds several new empirical generalizations about advertising elasticity the most important are as follows the average short term advertising elasticity is 12 which is substantially lower than the prior meta analytic mean of 22 there has been a decline in the advertising elasticity over time and advertising elasticity is higher 1 for durable goods than nondurable goods 2 in the early stage than the mature stage of the life cycle 3 for yearly data than quarterly data and 4 when advertising is measured in gross rating points than monetary terms the mean long term advertising elasticity is 24 which is much lower than the implied mean in the prior meta analysis 41 many of the results for short term elasticity hold for long term elasticity with some notable exceptions the authors discuss t

the value of the vote a model and test of the effects of turnout on distributive policy the most plausible assumption is that if certain groups or classes of citizens habitually do not vote their interest will be neglected in the actions and policies of governments key 1950 506 i introduction this article investigates the effects of voter participation on the distribution of government funds a simple model shows why for some types of distributive policy incumbents will have a greater probability of reelection if high turnout regions receive more funds than do low turnout regions the model predicts therefore that politicians who seek reelection and similarly politicians including the ideologically driven selected into office because they set popular policy will tend to allocate more funds to regions with higher turnout i test the model s predicted relationship between turnout and spending for the south in the 1930s spending data are county level allocations by the federal emergency relief administration fera which was the early new deal s main program to provide relief to the unemployed the evidence suggests that turnout had a substantial effect on fera spending if an individual was a voter rather than a nonvoter it typically led to an increase on the order of 30 in the expected fera allocation for the individual s county the findings shed light both on the role of voting in representative democracies and on the historical role of voting rights in the southern political system elections voter participation and policy representative democracy creates a tendency for government to set policy that improves politicians prospects for reelection this may occur because politicians design policy for the purpose of winning reelection or it may occur because elections sort into office those politicians who for ideological or other reasons tend to set policy that wins votes 1 the type of policy that improves the prospects for reelection depends upon how voters respond to policy to illustrate this point consider the distribution of a fixed sum between different regions e g counties one key consideration is the extent to which voting behavior responds to distributive policy allocating funds to groups that do not respond will be less likely to lead to reelection groups that do not respond include those who will always vote in support of the incumbent those who will always vote in opposition to the incumbent and those who do not vote previous work on distributive politics has examined how distribution is influenced by constituents voting behavior with respect to whom they support when they do vote for example wright 1974 wallis 1984 1987 1991 kiewiet and mccubbins 1985 cox and mccubbins 1986 and fleck 1999 examine favoritism of swing and loyal voters 2 this article takes a different but complementary approach by focusing on the distributive effects of whether people vote quite simply winning the approval of a group of citizens has a larger effect on reelection if those citizens vote in large numbers than if they do not this provides a reason to expect that politicians will tend to allocate relatively little to those who do not vote this is consistent with the long recognized point that nonvoters have little influence on policy a point that key 1950 made clear and that follows naturally from economic models of voting such as that of downs 1957 bennett and mayberry 1979 show a similar effect of legislative representation on interstate redistribution states with more representatives per capita in congress tend to have lower ratios of taxes paid into the federal treasury relative to federal grants in aid received by modeling and estimating the effects of voter participation this article contributes to the general understanding of how voting influences the allocation of resources furthermore the substantial size of the estimated effects underscores the critical role that voting rights played in the southern political system

the political economy of new deal fiscal federalism in 1930 the average american received somewhat more than 50 percent of his government services from local government 20 percent from state government and the remainder from the federal government by 1940 this pattern had been reversed with the federal government supplying roughly 50 percent state government 20 percent and local government 30 percent figure 1 shows how shares of non military expenditures by the three levels of government shifted dramatically away from local governments toward the national government during the decade the same was true of revenues this transition in the relative importance of state federal and local government was dramatic and from the perspective of the 1990s permanent figure 1 omitted the most important cause of the shift in fiscal terms was the implementation of national relief programs under the new deal the federal emergency relief administration fera the works progress administration wpa the social security programs and others between 1932 and 1940 direct relief expenditures account for roughly 45 percent of the growth in national expenditures 60 percent of the growth in state expenditures and 20 percent of the growth in local expenditures almost all of which came from federal and state grants for relief purposes even more revealing are the figures for the period between 1932 and 1935 in those three years national government expenditures rose by slightly less than 2 billion while expenditures for relief alone reached 2 2 billion in 1935 from zero in 1932 1 the increase in federal expenditures was significant but an important reason why state and national governments grew but local governments did not lay in the fiscal structure of the relief programs the extensive use of matching grants to finance relief expenditures created incentives for states to expand their fiscal effort while local governments were effectively able to substitute national and state relief grants for their own funds matching grants also allowed the states to control the amount spent in each program the national government was and is still today unable to control expenditures on these programs or to equalize welfare standards across states open ended matching grants entitled the states to unencumbered access to the federal treasury 2 the programs also permanently altered the american welfare system the categorical assistance programs of the social security act brought about a basic realignment of financial and administrative responsibilities between the federal state and local governments old age assistance aid to dependent children and aid to the blind were independently administered by state governments the act contained strong restrictions on the ability of the social security board to influence the administration of programs within the states explicitly forbidding the board to set personnel policies 3 why were open ended matching grants and a decentralized administrative structure adopted rather than some other institutional form public finance theory suggests that it may have been the best way for the federal government to support relief expenditures without discouraging continued state and local participation matching grants are usually proposed as a remedy to problems of externalities in this case the spillover is the movement of persons seeking relief from low benefit to high benefit states they solve the externality problem through the use of fiscal incentives as gramlich 1977 276 notes for matching grants the central government is expressly trying to stimulate spending in a certain area as we will see below matching grants did have this effect federal grants expanded rapidly but the state and local sector did not substitute federal grant moneys for state and local tax dollars on a large scale recent empirical studies of matching grants indicate that they result in somewhat less spending than the size of the grant indicating that state and local governments reduce their own expenditures on grant programs slightly in the presence of matching grants in contrast to lump sum grants where state and local governments are able to substitute significant amounts of federal grants for their own tax dollars

local economic development agglomeration economies and the big push 100 years of evidence from the tennessee valley authority we study the long run eects of one of the most ambitious place based economic development policies in u s history the tennessee valley authority using a rich panel dataset of counties we conduct an evaluation of the dynamic eects of the tva on local economies in the seventy years following the program s inception we nd that the tva led to short run gains in agricultural employment that were eventually reversed while impacts on manufacturing employment continued to intensify well after the program s subsidies had lapsed a pattern consistent with the presence of strong agglomeration economies in the manufacturing sector economists have long cautioned that the local gains created by place based policies may be oset by losses elsewhere yielding ambiguous eects on the u s as a whole building on the framework in glaeser and gottlieb 2008 we develop a novel approach to assessing the aggregate consequences of shifting the spatial distribution of manufacturing employment our ndings suggest the aggregate productivity gains associated with relocating manufacturing activity to the tva region were probably minimal

a history of mechanization in the cotton south the institutional hypothesis the cotton south has always lagged behind the rest of american agriculture in the use and development of large scale machinery this paper formalizes an idea often found in the historical literature in loosely specified form which argues that the institutional structure of the southern plantation economy caused this technological inertia in particular the institutional hypothesis argues that the annual labor contracts used to secure plantation labor discouraged partial mechanization and inventive activity by redirecting the impact of higher labor costs away from the development and adoption of labor saving machinery and toward the adoption of small unmechanizable tenancies this hypothesis is modeled and supporting evidence is presented its larger implications are also discussed

sample selection and treatment effect estimation of lender of last resort policies this article develops a framework for estimating multivariate treatment effect models in the presence of sample selection the methodology deals with several important issues prevalent in policy and program evaluation including application and approval stages nonrandom treatment assignment endogeneity and discrete outcomes this article presents a computationally efficient estimation algorithm and techniques for model comparison and treatment effects the framework is applied to evaluate the effectiveness of bank recapitalization programs and their ability to resuscitate the financial system the analysis of lender of last resort lolr policies is not only complicated due to econometric challenges but also because regulator data are not easily obtainable motivated by these difficulties this article constructs a novel bank level dataset and employs the new methodology to jointly model a bank s decision to apply for assistance the lolr s decision to approve or decline the assistance and the bank s

radio s impact on public spending if informed voters receive favorable policies then the invention of a new mass medium may affect government policies since it affects who is informed and who is not these ideas are developed in a voting model the model forms the basis for an empirical investigation of a major new deal relief program implemented in the middle of the expansion period of radio the main empirical finding is that u s counties with many radio listeners received more relief funds more funds were allocated to poor counties with high unemployment but controlling for these and other variables the effects of radio are large and highly significant

striking at the roots of crime the impact of welfare spending on crime during the great depression abstractduring the great depression contemporaries worried that people hit by hard times would resort to crime president franklin roosevelt argued that the massive government relief efforts struck at the roots of crime by providing subsistence income to needy families after constructing a panel data set for 81 large american cities for the years 1930 40 we estimate the effect of relief spending by all levels of government on crime rates the analysis suggests that a 10 percent increase in relief spending during the 1930s reduced property crime by roughly 1 5 percent by limiting the amount of relief recipients free time work relief may have been more effective than direct relief in reducing crime more generally our results indicate that social insurance which tends to be understudied in economic analyses of crime should be more explicitly and more carefully incorporated into the analysis of temporal and spatial variations in criminal activity

the incredible holc mortgage relief during the great depression this paper examines the relief provided by the home owners loan corporation holc a new deal program that purchased and refinanced over 1 million distressed residential mortgages i document that the holc paid relatively high prices for its mortgages most likely in an effort to encourage lender participation and stimulate the housing market the consequence was that lenders were able to remove poorly performing assets from their balance sheets at attractive prices while this meant the holc s ability to seek principal reductions was somewhat limited borrowers still received significant relief through the terms of the holc s more modern and forgiving mortgage contracts

assigning refugees to landlords in sweden efficient stable maximum matchings in this paper we investigate the problem of finding housing for refugees once they have been granted asylum in particular we demonstrate that market design can play an important role in a partial solution to the problem more specifically we investigate a specific matching system and we propose an easy to implement mechanism that finds an efficient stable and maximum matching such a matching guarantees that housing is efficiently provided to a maximum number of refugees and that no refugee prefers another specific landlord to their current match when at the same time that specific landlord prefers that refugee to their own current match

the american recovery and reinvestment act solely a government jobs program abstract this paper estimates the private and government sector employment effects of american recovery and reinvestment act arra spending via an instrumental variables strategy we argue that this aid was effectively fungible and states used it to offset declines in revenue this enables us to use exogenous variation in states budget positions to identify the act s employment effects we also exploit exogenous variation across states in arra highway funding according to our benchmark estimates average state and local government employment during the 24 months following the program s inception was between 156 000 and 563 000 persons greater as a result of arra spending 90 confidence interval the corresponding estimate for the private sector ranges from a loss of 182 000 to a gain of 1 1 million jobs our point estimate for the implied cost of creating a job lasting one year is 202 000 which is substantially larger than the corresponding estimate from the president s council of economic advisors

the political economy of the fair labor standards act of 1938 this paper examines the congressional passage of the american minimum wage law the fair labor standards act of 1938 voting on the act is modeled as a function of the concentration of the constituencies for minimum wage legislation north south differentials and legislator ideology it is shown that the house radically altered the final content of the bill abandoning a proposed wages and hours board with discretionary powers to determine minimum wages in favor of a flat rate following the objections of several interest groups north south divisions over the bill had little influence over congressional voting and the influence of constituent groups increased relative to legislators ideology as the bill became an important election issue

voter influence and big policy change the positive political economy of the new deal what conditions cause major policy changes under representative government this article addresses that question by providing a theoretically grounded analysis of a massive policy change the new deal it explains how the economic problems of the early 1930s initiated changes on several dimensions of policy federal spending labor market regulation and civil rights the article concludes by considering the broader lessons learned from the political economy of the new deal

employment politics and economic recovery during the great depression in earlier studies economic historians found that political goals rather than social or humanitarian objectives motivated much of new deal spending using new information on annual state level employment for the 1930s this paper shows that while politics are still important responding to the needs of the unemployed was an important determinant of new deal spending

the effect of internal migration on local labor markets american cities during the great depression the great depression offers a unique laboratory to investigate the causal impact of migration on local labor markets we use variation in the generosity of new deal programs and extreme weather events to instrument for migrant flows to and from u s cities in migration had little effect on the hourly earnings of existing residents instead in migration prompted some residents to move away and others to lose weeks of work or access to relief jobs for every 10 arrivals we estimate that 1 9 residents moved out 2 1 were prevented from finding a relief job and 1 9 shifted from full time to part time work

inter party competition intra party competition and distributive policy a model and test using new deal data this paper presents a theoreticalmodel examining the influence of two stylized types ofvoters loyal voters and swing voters the model showswhy both types of voters will influence thedistribution of benefits by a reelection seekingincumbent and it predicts how their influence willvary with the importance of the general electionrelative to that of the primary closer competitionbetween parties in the general election ceterisparibus increases the influence of swing votersrelative to that of loyal voters county level dataon the allocation of money and jobs by new deal reliefprograms confirm the model s predictions

work sharing during the great depression did the president s reemployment agreement promote reemployment the president s reemployment agreement pra of 1933 directed firms to reduce workweeks during the great depression so existing jobs could be spread into additional employment opportunities similar work sharing policies have recently been implemented across europe in hopes of reducing unemployment i find that ceteris paribus the work sharing aspects of the pra created nearly 2 5 million new employment opportunities in around four months however the programme also required firms to raise hourly wage rates offsetting close to half of these gains furthermore most of the remaining employment gains were wiped out after cartel oriented industry specific codes of fair competition supplanted the pra