Recovery from the Great Depression: The Farm Channel in Spring 1933

84 Pages Posted: 21 Feb 2017

See all articles by Joshua Hausman

Joshua Hausman

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy

Paul W. Rhode

University of Michigan at Ann Arbor; National Bureau of Economic Research (NBER)

Johannes Wieland

University of California, San Diego (UCSD) - Department of Economics

Date Written: February 2017

Abstract

From March to July 1933, industrial production rose 57 percent. We show that an important source of recovery was the effect of dollar devaluation on farm prices, incomes, and consumption. Devaluation immediately raised traded crop prices, and auto sales grew more rapidly in states and counties most exposed to these price increases. The response was amplified in counties with more severe farm debt burdens. For plausible assumptions about farmers’ relative MPC, the incidence of higher farm prices, and the aggregate multiplier, this redistribution to farmers accounted for a substantial portion of spring 1933 growth. This farm channel thus provides an example of how the distributional consequences of macroeconomic policies can have large aggregate effects. That recovery in 1933 benefited from redistribution to farmers suggests an important limitation to the use of 1933 as a guide to the effects of monetary regime changes in other circumstances.

Suggested Citation

Hausman, Joshua and Rhode, Paul W. and Wieland, Johannes, Recovery from the Great Depression: The Farm Channel in Spring 1933 (February 2017). NBER Working Paper No. w23172, Available at SSRN: https://ssrn.com/abstract=2920390

Joshua Hausman (Contact Author)

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

Paul W. Rhode

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Johannes Wieland

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

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