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

Joshua Hausman, Paul Rhode and Johannes Wieland

American Economic Review, 2019, vol. 109, issue 2, 427-72

Abstract: From March to July 1933, US 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.

JEL-codes: E32 E65 N12 N52 Q11 Q12 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20170237
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Citations: View citations in EconPapers (17)

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Working Paper: Recovery from the Great Depression: The Farm Channel in Spring 1933 (2017)
Working Paper: Recovery from the Great Depression: The Farm Channel in Spring 1933 (2017)
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