After the War Boom: Reconversion on the U.S. Pacific Coast, 1943-49
NBER Working Paper No. 9854
During the Second World War, the American Pacific Coast experienced a tremendous economic boom fueled by disproportionately large flows of military spending. Even before the conflict's end, fears spread that the region's postwar economy would not provide sufficient jobs for its greatly enlarged labor force. Responsible authorities predicted one million workers one-quarter of the labor force would be unemployed one year after demobilization. But the conversion experience over the 1945-49 period proved far easily than anticipated, a finding which this paper attributes to strong home market effects' highlighted in the new Economic Geography literature. Based on an empirical investigation of the long-run relationship between manufacturing production and the size of the Pacific region's market, this study finds support for the views that the region's economic structure could support multiple equilibria and that the transitory shock of military spending during World War II helped push the Pacific Coast economy from a low-level' equilibrium to a higher-level' equilibrium consistent with the same fundamentals.