Bargaining Over a New Welfare State: A Model of the Regional Distribution of New Deal Funds

38 Pages Posted: 28 Oct 2008 Last revised: 15 Sep 2010

See all articles by Alessandro Bonatti

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Kaj Thomsson

Maastricht University - Department of Economics

Date Written: November 15, 2008

Abstract

The goal of this paper is to develop an estimable model of President-Congress bargaining in the US, and to use this model to provide a better understanding of the objectives behind the New Deal. In the model, the distribution of federal funds across regions of the country is the outcome of a bargaining game in which the President acts as the agenda-setter and Congress bargains over the final shape of the spending bill. For any given preferences (of the President) and any distribution of seats in Congress, the model delivers a unique predicted allocation. Combined with data on New Deal programs, we use this to estimate the objectives of the Roosevelt administration. The results indicate that economic concerns for relief and recovery, though not necessarily for fundamental reform and development, largely drove the New Deal spending, and that political concerns also mattered but to a lesser extent. In addition, our model indicates that a less politically minded President would not have been constrained by Congress the way Roosevelt was.

Keywords: Political Economy, Legislative Bargaining, New Deal, US Congress, Public Spending

JEL Classification: C78, D72, H11, H50, N42, P48

Suggested Citation

Bonatti, Alessandro and Thomsson, Kaj, Bargaining Over a New Welfare State: A Model of the Regional Distribution of New Deal Funds (November 15, 2008). Available at SSRN: https://ssrn.com/abstract=1287640 or http://dx.doi.org/10.2139/ssrn.1287640

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Kaj Thomsson (Contact Author)

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

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