Working Paper: NBER ID: w13692
Authors: Todd C. Neumann; Price V. Fishback; Shawn Kantor
Abstract: During the New Deal the Roosevelt Administration dramatically expanded relief spending to combat extraordinarily high rates of unemployment. We examine the dynamic relationships between relief spending and local private labor markets using a new panel data set of monthly relief, private employment and private earnings for major U.S. cities in the 1930s. Impulse response functions derived from a panel VAR model that controls for time and city fixed effects show that a work relief shock in period t-1 led to a decline in private employment and a rise in private monthly earnings. The finding offers evidence consistent with contemporary employers' complaints that work relief made it more difficult to hire, even though work relief officials followed their stated policies to avoid affecting private labor markets directly. Meanwhile, negative shocks to private employment led to increases in work relief, consistent with Roosevelt's stated goal of using relief to promote relief and recovery.
Keywords: New Deal; relief spending; labor market; private employment; work relief
JEL Codes: N0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| work relief spending (H53) | private employment (J68) |
| work relief spending (H53) | private monthly earnings (J31) |
| negative shocks to private employment (J63) | work relief spending (H53) |
| overall relief spending (H84) | private employment (J68) |
| overall relief spending (H84) | private earnings (D33) |
| WPA work relief spending (I38) | private employment (J68) |