Income shocks and housing spillovers: Evidence from the World War I Veterans’ Bonus

Sarah Quincy

Journal of Urban Economics, 2022, vol. 132, issue C

Abstract: This paper documents how a one-time income shock can alter the household wealth distribution through local housing market channels. In 1936, the United States government unexpectedly gave World War I veterans a large income transfer. This payment, equivalent to 1936 per capita income, greatly improved recipients’ 1940 home values and homeownership rates compared to those of their 1930 neighbors. These home value gaps widened as the spatial intensity of the shock increased but only for likely home purchasers. Loan-level data suggest this combination of direct benefits and negative neighborhood spillovers derived from veterans crowding out other potential borrowers.

Keywords: Income shocks; Housing spillovers; Great Depression (search for similar items in EconPapers)
JEL-codes: G21 H23 N22 R21 R31 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:132:y:2022:i:c:s0094119022000717

DOI: 10.1016/j.jue.2022.103494

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