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  4. April 2016
  5. Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans' Bonus

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans' Bonus

  • Joshua K. Hausman
American Economic Review
vol. 106, no. 4, April 2016
(pp. 1100–1143)
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Abstract

Conventional wisdom has it that in the 1930s fiscal policy did not work because it was not tried. This paper shows that fiscal policy was tried in 1936. The veterans' bonus of 1936 paid 2 percent of GDP to 3.2 million veterans; the typical veteran received a payment equal to per capita income. Multiple sources, including a household consumption survey, show that veterans spent the majority of their bonus. Point estimates of the MPC are between 0.6 and 0.75. Spending was concentrated on cars and housing in particular. (JEL E21, E32, E62, N32, N42)

Citation

Hausman, Joshua K. 2016. "Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans' Bonus." American Economic Review, 106 (4): 1100–1143. DOI: 10.1257/aer.20130957

Additional Materials

JEL Classification

  • E21 Macroeconomics: Consumption; Saving; Wealth
  • E32 Business Fluctuations; Cycles
  • E62 Fiscal Policy
  • N32 Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: U.S.; Canada: 1913-
  • N42 Economic History: Government, War, Law, International Relations, and Regulation: U.S.; Canada: 1913-