WWII contract spending and inequality

Andrew Bossie and Daniel Kuehn

Applied Economics Letters, 2021, vol. 28, issue 8, 635-639

Abstract: We find that the share of state-level income captured by the top 1% of income earners falls by 1.73pp in response to WWII contract spending. We also find a postwar permanent decline in top 1% income shares of 0.85pp attributable to wartime spending. This is half the average state-level decline in inequality during the war and one-fifth of the average postwar decline in inequality relative to 1940. We take this as evidence that WWII military spending induced permanent labour market changes in manufacturing that reduced inequality relative to its level in 1940.

Date: 2021
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DOI: 10.1080/13504851.2020.1770185

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