Working Paper: CEPR ID: DP634
Authors: J. Bradford De Long; Barry Eichengreen
Abstract: The post-World War II reconstruction of Western Europe was one of the greatest economic and foreign policy successes of this century. `Folk wisdom' assigns much of the credit to the Marshall Plan, which transferred some $13 billion of US aid to Europe between 1948 and 1951. We examine the economic effects of the Marshall Plan, and find that it was too small to have significantly accelerated recovery by financing private investment, speeding the repair of infrastructure or easing commodity bottlenecks. None the less, we conclude that the conditions attached to Marshall aid contributed significantly to Western Europe's rapid growth after World War II, by pushing Europe's `mixed economies' in a direction that left them with a mixture of more `market' and fewer controls.
Keywords: Marshall Plan; Foreign Aid
JEL Codes: F02
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Marshall Plan conditions (F35) | reductions in government spending (H56) |
| Marshall Plan conditions (F35) | shift towards a mixed economy (P39) |
| Marshall Plan (F35) | economic policy changes (E69) |
| Marshall Plan (F35) | economic growth environment (O44) |
| Marshall Plan (F35) | 2% increase in national income levels post-1951 (E25) |