Household Debt and Economic Recovery Evidence from the U.S. Great Depression

Katharina Gärtner ()
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Katharina Gärtner: Free University Berlin
Authors registered in the RePEc Author Service: Katharina Knoll

No 36, Working Papers from European Historical Economics Society (EHES)

Abstract: The Great Recession has focused renewed attention on the role of household leverage in the business cycle. Household debt overhang and the ensuing process of deleveraging are often cited as factors holding back economic recovery. This paper studies the relationship between household debt and economic performance during the Great Depression in the U.S. on the state level. Using a newly compiled dataset, I present evidence that debt overhang in the household sector acted as a severe drag on economic recovery in the 1930s. States with higher initial debt-to-income ratios recovered considerably slower. These findings point toward a close link between the accumulation of debt and the severity and duration of recessions.

Keywords: Great Depression; household debt; mortgage finance; U.S. (search for similar items in EconPapers)
JEL-codes: E2 E3 N22 R2 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2013-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hes:wpaper:0036

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