The Dynamics of Relief Spending and the Private Urban Labor Market During the New Deal

Todd C. Neumann, Price V. Fishback, Shawn Kantor

NBER Working Paper No. 13692
Issued in December 2007, Revised in September 2009
NBER Program(s):Development of the American Economy, Economic Fluctuations and Growth

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.

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Document Object Identifier (DOI): 10.3386/w13692

Published: Neumann, Todd C. & Fishback, Price V. & Kantor, Shawn, 2010. "The Dynamics of Relief Spending and the Private Urban Labor Market During the New Deal," The Journal of Economic History, Cambridge University Press, vol. 70(01), pages 195-220, March. citation courtesy of

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