Working Paper: NBER ID: w25997
Authors: Nicholas Z. Muller
Abstract: The present study gathers prices for firewood and estimates the premium paid for dry fuel, relative to green wood, on a monthly basis from 1922 to 1935. This premium conveys consumers’ willingness-to-pay for a good available for immediate consumption relative to the same good ready for use after roughly one year. Embedded in this premium are consumers’ time preferences. The paper documents time series variation in the dry fuel premium and associated time preference spanning the macroeconomic shocks before, during, and after the Great Depression. The dry fuel premium increased by a factor of four during the recession of 1923 to 1924, and fell by a factor of two following the Great Crash of October 1929. Key factors in determining the premium for dry fuel were variation in wages, inflation, stock market returns, and bond yields. This paper supports the uncertainty hypothesis as an explanation for the precipitous fall in consumption expenditures following the Great Crash of 1929.
Keywords: Time Preference; Great Depression; Firewood Prices; Macroeconomic Shocks
JEL Codes: D15; N12; N72; Q23; Q41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firewood prices (L73) | consumer time preferences (D15) |
| consumer time preferences (D15) | firewood prices (L73) |
| macroeconomic indicators (E66) | firewood prices (L73) |
| macroeconomic indicators (E66) | consumer time preferences (D15) |