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

68 Pages Posted: 21 Dec 2007 Last revised: 31 May 2021

See all articles by Todd Neumann

Todd Neumann

University of California, Merced; National Bureau of Economic Research (NBER)

Price V. Fishback

University of Arizona; National Bureau of Economic Research (NBER)

Shawn Kantor

National Bureau of Economic Research (NBER)

Date Written: December 2007

Abstract

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.

Suggested Citation

Neumann, Todd and Fishback, Price V. and Kantor, Shawn, The Dynamics of Relief Spending and the Private Urban Labor Market During the New Deal (December 2007). NBER Working Paper No. w13692, Available at SSRN: https://ssrn.com/abstract=1077818

Todd Neumann (Contact Author)

University of California, Merced ( email )

P.O. Box 2039
Merced, CA 95344
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Price V. Fishback

University of Arizona ( email )

Tucson, AZ 85721-0108
United States
520-621-4421 (Phone)
520-621-8450 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Shawn Kantor

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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