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The Multiplier for Federal Spending in the States During the Great Depression

Published online by Cambridge University Press:  13 March 2015

Price Fishback
Affiliation:
Professor, Department of Economics, University of Arizona, Tucson, AZ 85721. E-mail: pfishback@eller.arizona.edu.
Valentina Kachanovskaya
Affiliation:
Ph.D. student, Department of Economics, University of Arizona, Tucson, AZ 85721. E-mail: Kachanovskaya@gmail.com.

Abstract

To estimate the impact of federal spending on state incomes, we develop an annual panel data set between 1930 and 1940. Using panel methods we estimate that an added dollar of federal spending in the state increased state per capita income by between 40 and 96 cents. The point estimates for nonfarm grants are higher and for AAA farm grants are much smaller and negative in some cases. The spending led to increase in durable good spending on automobiles but had no positive effects on private employment.

Type
Articles
Copyright
Copyright © The Economic History Association 2015 

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Footnotes

The research has been funded by National Science Foundation Grants Nos. SES-1061927, SES- 0921732, SES 0617972, and SES 0214483, and funds from the University of Arizona Economics Department. The discussion here does not reflect the views of any of these funding agencies. We thank Josh Angrist, Robert Barro, John Bound, Sandy Dall'Erba, Briggs Depew, Claudia Goldin, Gautam Gowrisankaran, Theresa Gutberlet, Kei Hirano, Taylor Jaworski, Aart Kraay, Shawn Kantor, Carl Kitchens, Larry Katz, Irving Llamasos Rosas, Kris Mitchener, Emi Nakamura, Ron Oaxaca, Valerie Ramey, Paul Rhode, Jón Steinsson, James Stock, John Wallis, Tiemen Woutersen, and several anonymous referees for comments and insights. We also benefited from discussions at seminars at Arizona, Australian National University, the Chicago Federal Reserve Bank, Dartmouth, Georgia, Guelph, Harvard, Johns Hopkins, Kenyon, Latrobe, London School of Economics, Michigan, Mississippi, Oxford, Peking, Rhodes, Simon Fraser, UC San Diego, University College London, Vermont, Warrick, and Washington University, as well as presentations at the NBER Summer Institute, the Huntington-All UC Group in Economic History, and the Economic History Society of South Africa. All errors are the authors’ own.

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