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Title: New Deal Policies and Recovery from the Great Depression
Citation Type: Dissertation/Thesis
Publication Year: 2013
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Abstract: What forces led to rapid recovery of the U.S. economy after 1933? Why was recovery derailed by a severe recession in 1937? Since Friedman and Schwartz (1963), economists have emphasized monetary explanations. This dissertation shows that in three crucial instances other factors mattered. Methodologically, it demonstrates the value of using micro data to explore macro questions. The first chapter considers the effect of the 1936 veterans' bonus. Conventional wisdom has it that in the 1930s fiscal policy did not work because it was not tried. This chapter shows that fiscal policy, though inadvertent, was tried in 1936, and a variety of evidence suggests that it worked. A deficit-financed veterans' bonus provided 3.2 million World War I veterans with cash and bond payments totaling 2 percent of GDP; the typical veteran received a payment equal to annual per capita personal income. This chapter uses time-series and cross-sectional data to identify the effects of the bonus. I exploit four sources of quantitative evidence: a detailed household consumption survey, cross-state and cross-city regressions, aggregate time-series, and a previously unused American Legion survey of veterans. The evidence paints a consistent picture in which veterans quickly spent the majority of their bonus. Spending was concentrated on cars and housing in particular. Narrative accounts support these quantitative results. A back-of-the-envelope calculation suggests that the bonus added 2.5 to 3 percentage points to 1936 GDP growth. In my second chapter, I consider the causes of the severe recession that followed the boom year of 1936. The 1937-38 recession was one of the largest in U.S. history. Industrial production fell 32 percent and the nonfarm unemployment . . .
Url: https://escholarship.org/uc/item/1sr8n2x6
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Authors: Hausman, Joshua Kautsky
Institution: University of California, Berkeley
Department: Economics
Advisor: Eichengreen, BarryDeLong, J. Bradford
Degree: PhD
Publisher Location: Berkeley
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Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure, Other, Poverty and Welfare
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