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

42 Pages Posted: 9 Nov 2020 Last revised: 27 Feb 2021

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: November 2020

Abstract

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.

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Suggested Citation

Hausman, Joshua and Rhode, Paul W. and Wieland, Johannes, Farm Product Prices, Redistribution, and the Early U.S. Great Depression (November 2020). NBER Working Paper No. w28055, Available at SSRN: https://ssrn.com/abstract=3727131

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)

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Johannes Wieland

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

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La Jolla, CA 92093-0508
United States

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