Working Paper: NBER ID: w28055
Authors: Joshua K. Hausman; Paul W. Rhode; Johannes F. Wieland
Abstract: We argue that falling farm product prices, incomes, and spending may explain 10-30 percent of the 1930 U.S. output decline. Crop prices collapsed, reducing farmers' incomes. And across U.S. states and Ohio counties, auto sales fell most in crop-growing areas. The large spending response may be explained by farmers' indebtedness. Reasonable assumptions about the marginal propensity to spend of farmers relative to nonfarmers and the pass-through of farm prices to retail prices imply that the collapse of farm product prices in 1930 was a powerful propagation mechanism worsening the Depression.
Keywords: No keywords provided
JEL Codes: E32; E65; N12; N52; Q11; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Falling farm product prices (Q11) | Reduced farmers' incomes (Q12) |
| Reduced farmers' incomes (Q12) | Decline in consumer spending (D12) |
| Falling farm product prices (Q11) | Decline in consumer spending (D12) |
| Higher share of population living on farms (J43) | Larger decline in auto sales (L81) |
| Decline in farm product prices (Q11) | Exacerbation of the economic downturn (F44) |