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Title: Unequal Legacies of Financial Crises Evidence from the Panic of 1873
Citation Type: Miscellaneous
Publication Year: 2024
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Abstract: This article examines the long-term, intergenerational effects of financial crises on rich versus poor households. I study the first "Great Depression" originating from the Panic of 1873 in the United States and find that the economic consequences of this crisis persisted for over a century, especially for poor households. Using spatial variation in severity of the crisis and linked census and administrative records from 1870 to 2000, I trace how affected families fared across generations. Poor households, who had no wealth were unable to withstand the crisis in cities, were forced to relocate to rural areas with lower living costs. However, these areas offered worse educational opportunities and primarily lower-skilled jobs, potentially limiting prospects for future generations. Descendants of poor families with higher exposure to the crisis therefore show significantly lower education, income, and wealth. Importantly, these effects persist for four generations-well into the 2000s-and are most pronounced for households in the bottom third of the wealth distribution. Overall, my results suggest that recoveries from financial crises have historically been two-pronged: while some recover quickly and fully, lives of others-and their future generations-can be damaged irreparably.
Url: https://bmphd.hkust.edu.hk/sites/default/files/2024-12/JMP_Harsha_Dutta.pdf
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Authors: Dutta, Harsha
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Data Collections: IPUMS USA - Ancestry Full Count Data
Topics: Education, Labor Force and Occupational Structure, Migration and Immigration, Poverty and Welfare
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