Farm Product Prices, Redistribution, and the Early U.S. Great Depression

Joshua K. Hausman; Paul W. Rhode; Johannes F. Wieland

doi:10.3386/w28055

Farm Product Prices, Redistribution, and the Early U.S. Great Depression

Joshua K. Hausman, Paul W. Rhode & Johannes F. Wieland

Working Paper 28055

DOI 10.3386/w28055

Issue Date November 2020

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.

Jon Denton-Schneider provided superb research assistance. We are grateful for comments and encouragement from Price Fishback, John Leahy, Gary Richardson, Christina Romer, Matthew Shapiro, Peter Temin, and audiences at the Society for Economic Dynamics, the University of Michigan, the NBER Development of the American Economy program meeting, and Florida State. Rhode’s work was in part funded by NSF grant SES- 0921732 (“Dramatic Rise in Agricultural Productivity in the U.S During the Twentieth Century: Disentangling the Roles of Technological Change, Government Policy, and Climate”). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
MARC RIS BibTeΧ

Farm Product Prices, Redistribution, and the Early U.S. Great Depression

Related

Topics

Programs

More from NBER